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A Study on Economic Evaluation of Beneficiary Pays Principle in Water Resource Management - The Case of Namyangju in Korea -

Yoon， Jaehyun 1

1KDI 국제정책대학원

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ABSTRACT

Using hedonic price method, this paper analyzes the impact of restriction for water qualityprotection on property value with the officially announced price of reference land in the city ofNamyangju in 2012 to evaluate Water Use Fee, based on beneficiary pays principle, levied on thedownstream area of the Han River in Korea. The results from the regression analyses of the models used show that the double-log model is the preferred model in the case of Namyangju. Using the double-log model, the total compensation for the city of Namyangju is estimated to be 8.6 trillion won with 95% confidence interval between 4.4 trillion and 12.4 trillion won. Under the perpetuity compensation scheme at the discount rate of 10%, the estimated annual compensation is 0.9 trillion won with 95% confidence interval between 0.4 trillion and 1.2 trillion won. This is more than Water Use Fee collected in 2012 for the Han River, which is approximately 0.5 trillion won. Considering the size of the restricted area of the Paldang area, which is more than 18 times of that of Namyangju, the rate of Water Use Fee, which is based on beneficiary pays principle and imposed on the residents of the downstream area, needs to be increased to sufficiently compensate the economic loss caused to the upstream areas of the Han River in Korea.

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