ABSTRACT
Groundwater quality management has become an important public policy issue. While the extent and severity of groundwater degradation is not currently well documented, public concern over possible human health effects from drinking contaminated groundwater has led 33 states to enact groundwater protection legislation between 1985 and 1990 (U.S. Environmental Protection Agency 1990). Despite the level of concern and legislation relating to groundwater quality, little is known about the economic benefits of groundwater protection. Although previous economic research on groundwater focused primarily on the costs of policies to remedy degraded groundwater, groundwater protection policies can yield a range of possible benefits. These include avoided losses from actual human health effects, such as increased mortality or morbidity from exposure to contaminants, possible ecological damages, and losses of intrinsic values associated with groundwater resources. One area of economic damages that has received rela-
tively little attention in previous work is that of averting expenditures, or the costs incurred by households, firms, or governments to avoid exposure to a groundwater contaminant. This study illustrates how empirical measurement of such expenditures can yield conceptually valid estimates of an important category of economic costs of environmental degradation and how this information may be used in policy decisions.
