Ecological Economics 69 (2010) 651-657

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Ecological Economics

j ourna l homepage: www.e lsev ie r.com/ locate /eco lecon

Analysis

Accounting for cultural heritage — A theoretical and empirical exploration with focuson Swedish reindeer husbandry

Göran Bostedt, Tommy Lundgren ⁎Department of Forest Economics & Centre for Environmental and Resource Economics, Swedish University of Agricultural Sciences, S-901 83 Umeå, Sweden

⁎ Corresponding author.E-mail address: tommy.lundgren@sekon.slu.se (T. Lu

0921-8009/$ – see front matter © 2009 Elsevier B.V. Aldoi:10.1016/j.ecolecon.2009.10.002

a b s t r a c t

a r t i c l e i n f o

Article history:Received 27 February 2009Received in revised form 20 August 2009Accepted 7 October 2009Available online 10 November 2009

Keywords:Capital theoryCultural capitalDynamic growthNatural capitalSocial accounting matrix

JEL classification:Q2Q51Q56R11

The aim of this paper is to explore some of the theoretical and empirical aspects of an economy whichincludes cultural capital. We use a simple dynamic growth model and the concept of a social accountingmatrix (SAM) to illustrate how the addition of income flows and net changes of various natural and culturalresources can be incorporated into a broader measure of welfare. The Swedish reindeer industry, managedby the indigenous Sami people, is used as an example since it is generally regarded to have significantcultural heritage value, beyond its contribution to conventional national accounts. We discuss a theoreticallycorrect compensation to a cultural sector for preserving and maintaining a cultural heritage. Furthermore,we attempt to estimate the cultural value of the Sámi Reindeer sector in Sweden using a CVM survey. Theresults suggest that the willingness to pay (per year) to maintain cultural heritage at least at the current levelmay be quite substantive, estimates showing it can be several times the industry's turnover per year.

ndgren).

l rights reserved.

© 2009 Elsevier B.V. All rights reserved.

1. Introduction

Measuring comprehensive welfare growth indices at the nationallevel has been an important and vibrant part of economics research for along time. National income accounts became important in the 1940s,primarily to aid macro-economic policy analysis. The accounts weredesigned to provide detailed information about e.g. total supply andtotal demand, savings and investments in man-made capital, andimports and exports. Gross national product (GNP, value of productionin a country) has been used to indicate thewelfare of a nation. Criticismsagainst GNP are plentiful; one argument being that GNP is a grossmeasure and should be replaced by net national product, NNP, wherecapital depreciation is included. NNP, however, may still be a poormeasure of welfare because it does not treat environmental and naturalresources. Numerous attempts to augment the traditional NNPmeasureto include environmental and resource stocks and flows are nowavailable (see e.g. Heal and Kriström, 2002, and references therein). Onemajor conclusion is that depreciation/appreciation termsof stocks (manmade, natural, etc) in an economy appear on the expenditure side of theeconomy (see e.g. Hartwick, 2001, or Mäler, 1991). Also, income terms,such as interest on various stocks in the economy, have been suggestedto be included on the income side of the economy. Hultkrantz (1992)

outlines an extension of the national accounts in Sweden to includevariousflows from the forest resource stock, so-called green accounting.He finds that the total net value added provided by forest resources andforestry labor in 1987was 22 billions SEK, which is one thirdmore thanthe contribution of forestry to the “conventional” GNP. This suggeststhat ignoring environmental and resource stocks and flows in themeasurement of welfare from the forest resource could lead to seriousmisallocations of resources.

Alternative welfare measures are potentially yet further importantwhen looking at regions or countries with various and vast naturaland cultural resources. An example of such a region and country is theSwedish mountain region situated in northwest Sweden. Pristine andscenic landscape, clean air and water, various game and carnivorepopulations, extensive forest resources, are just a few examples ofnatural and environmental resources that can be found in this region.Furthermore, an indigenous population — the Sami people —

contributes to a cultural resource stock by operating reindeerhusbandry and by various other activities that affect economic outputand welfare. These effects can be both positive and negative(externalities). For example, reindeer husbandry is in conflict withforestry since silvicultural activities negatively affect the biomass oflichen, a crucial food resource for the free-ranging semi-domesticatedreindeer during the winter season. This is a clear case of an externalityfrom forestry on reindeer husbandry, which remains unsolved due toan unclear legal situation. Technically, the reindeer herders have

652 G. Bostedt, T. Lundgren / Ecological Economics 69 (2010) 651-657

grazing rights for their reindeer on private forest land, but their onlyway of influencing forest owners is through mandatory consultationmeetings. Forest owners are however not required to followrecommendations by the reindeer herders. On the other hand, theSami people uphold a cultural heritage that, inter alia, attracts tourist.These are just two examples of situations where traditional welfareaccounting methods would underestimate the welfare importance ofa natural resource dependent industry, in this case the reindeerindustry, since these accounts ignore the welfare effects which are notpriced by the market provided by the cultural resource stock.

Practical assessments of natural resources and their importance ona national or regional level are scarce in the literature. Prudham andLonergan (1993) outline and discuss how practical regional resourceaccounting could be performed along the lines of the theoreticalliterature. In principal, this means adjusting income and productionaccounts to include flows and depreciation from natural resources.Comments and experiences with practical regional social accountingin general, not focusing specifically on natural or cultural resources,can be found in Schwarm and Cutler (2003). Cultural capital andanalyses of its interactions with an economy is scarce, to ourknowledge, in the literature. A few attempts have been made though;see e.g. Throsby (1995, 1999). The concept of “culture” is somewhatdifferent in his analysis, focusing mainly on performing arts andculture and not the social and economic aspects of a cultural heritage.Social capital, intuitively closely linked to cultural capital and culturalcustoms, has been suggested to be the missing link in growth theoryaside from human, man made, and natural capital (see e.g. Grooteart,1998, or Nyangena, 2006). Cultural capital or resources is somewhatsimilar to the notion of social capital as it tries to account for socialstructures and other intangible assets connected to cultural heritage.

The purpose of this paper is to begin with to develop the theoreticalaspects of measuring welfare in an economy where a natural resourcedependent industry provides important cultural benefits. We will usethe concept of a social accounting matrix (SAM) to illustrate howthe addition income flows and depreciations of natural and culturalresources can, theoretically, be incorporated into amore comprehensivemeasure of welfare, somethingwhich to our knowledge has never beendone before. We also suggest how to compensate a cultural sector forpreserving a cultural heritage. This is followed by an attempt atempirically estimating the cultural benefits of Swedish reindeerhusbandry through the Contingent Valuation Method (CVM), cf.Mitchell and Carson (1989). Althoughwewill use the Swedish reindeerindustry to show the potential importance of incorporating culturalresource stocks, the theoretical model is completely general andapplicable to other settings that involves cultural capital, and there isconsiderable scope for potential further applications. Examples thatspring tomindare theMaori culture onNewZealand, theMaasai culturein East Africa, or the Native American population in Alaska.

Toour knowledge, the theoretical and empirical contributions in thispaper are novel to the economics literature. We explore theoreticallyhow cultural heritage may change the conception of welfare measure-ment, and how it is linked to a renewable resource. Furthermore, weattempt to actually value the benefits of a cultural heritage, which, atleast in the context of conventional evaluation studies such ascontingent valuation, has not been done before. The theoretical resultsshow that if the individuals in an economy can enjoy benefits from acultural heritage, then, in welfare terms, this value is equal to themonetary value of the cultural stock as a consumption good. Theempirical results suggest that the estimated value ofmaintaining a Samicultural heritage may be considerable higher than current actualsubsidies.

The paper is organized as follows. Next section discusses howcultural capital can be incorporated into a simple dynamic growthmodel andwe focus specifically on the pastoral Sami culture of northernScandinavia as an illustrative example. Further, we explore the welfareissues related to this phenomenon and discuss a theoretically sound

compensation to the Sami people for upholding and maintaining acultural heritage. This is followed by empirical results from a CVMsurvey on the cultural benefits of the Swedish reindeer industry. Finally,the implications of these results are discussed in a concluding section.

2. Welfare accounting with natural and cultural capitals

The framework presented here builds on the social accountingmodeling framework developed by Hartwick (2000, 2001). We use asocial accounting matrix to describe how the inclusion of natural andcultural resources in a simple dynamic model of an economy can alterthe notion of national income and production.

A recent attempt to come to terms with culture in the specificcontext of economic activities can be found in a report of the U.N.WorldCommissiononCulture andDevelopment (WCCD, 1995). The report hastwo interpretations of culture. The first one defines culture as a set ofactivities undertaken within the so-called “cultural industries”. Culturecan thus be thought of as being represented by a “cultural sector” of aneconomy. Economic activities associated with this cultural sector couldbe a variety of different things. It could be 1) arts and/or music, or 2)some economic activity connected to some cultural heritage, such asreindeer herding performed by indigenous Sami people in northernScandinavia, or someother cultural heritage associatedwith indigenouspeople. The second interpretation is that culture is expressed in aparticular part of a society's values or customs (a local variation), whichevolve over timeas they are transmitted fromone generation to another(Throsby, 1995).

With these interpretations, we are able to define cultural capital asan asset that contributes to cultural and economic values. Morespecifically, cultural capital is the stock of cultural value embodied inan asset (Throsby, 1999). This stock gives rise to a flow of goods andservices over time, i.e., to commodities which themselves may haveboth cultural and economic values. The asset may be tangible orintangible. Tangible cultural assets exist in buildings, structures, sitesand locations endowed with cultural significance; such as the Himejicastle in Japan, or the Alhambra in Spain. Intangible cultural capital isa set of ideas, practices, beliefs, traditions and values that serve toidentify and bind together a given group of people, like the culturalimportance of practices that bind together certain indigenous people.Both tangible and intangible cultural assets give rise to a flow ofservices, negative or positive, which may form a part of private finalconsumption.

Now let us try to incorporate the notion of cultural capital intoeconomic analysis. There is likely to be a correlation between thecultural value and the economic value, but the relationship is by nomeans a perfect one. The causal direction is likely to be that culturalvalue augments economic value, but not by necessity. The question iswhat impact cultural capital has on welfare. As mentioned before,neo-classical models of economics have been developed to includeboth human and natural capital in addition to physical or man-madecapital. Human capital has been shown to be important in endogenousgrowth modeling (see e.g. Aghion and Howitt, 1998), and as weshown above, natural capital can be added to the picture improvingdescriptive and predictive powers of such models. Specifying aproduction function that accounts for cultural capital could provideinsights into, e.g., substitutability between different types of capital (ifit exists). A useful specification of such a production function wouldbe one that is articulated both in terms of economic and culturalvalues and their contribution to output. Throsby (1999) suggests thefollowing general dynamic specification of the stock of cultural capital

dKcðtÞ = dt = ½I c;mðtÞ–δcðtÞKcðtÞ� + Ic;nðtÞ

where (suppressing time index), K c is the stock of cultural capital, Ic,m

is maintenance investment, δc is the depreciation rate, and Ic,n is newinvestment in the cultural stock. This is basically the standard physical

653G. Bostedt, T. Lundgren / Ecological Economics 69 (2010) 651-657

capital equation of motion found in the economics literature(recognizing that Ic,m+Ic,n=gross investment). This specification is“blunt” and not very useful since it does not specify exactly what newinvestment in culture is or inwhatway it affects the economy. Includingthis in a model of an economy would simply mean that an additionalcapital stock is added to operate in the production function. However,the crucial problem is to define what governs new investment in thecultural stock, and how this cultural capital affects the economy. It is, forexample, reasonable to assume that culture heritage or capital entersforemost as an argument in the utility function, and not necessarily theproduction function (or a combination).

Let us focus ideas and think of a particular cultural phenomena; theSami culture found in the mountain region of north Sweden. The Samiare an indigenous people and are spread out in the north of Scandinavia.The core feature of their culture is reindeer herding which plays a keyrole in their own cultural identity and traditions, but also contributes tothe overall cultural heritage of northern Scandinavia. Beside this mainoccupation, they alsomanufacture and sell Sami artwork and contributeto the tourism sector in various ways. How can we incorporate thiscultural phenomenonand its contributions into amodel of aneconomy?

Since reindeer herding is the core activity in the Sami culture andhas been for a long time, we first specify a dynamic equation for thisrenewable resource (suppressing time index):

dR= dt = zðRÞ–gðR; L1Þ ð1Þ

where R is the stock of reindeers, and L1 is the amount of labor used inreindeer herding, z(R) is an inverted U-shaped biomass growthfunction, and g(·) is the harvest production function (which isassumed homogenous of degree unity in its arguments, R and L1). Theharvest g(·) is used as input to produce consumer goods; productsbased on reindeer meat such as “renskav” or “souvas” (thin slices ofmeat prepared in various ways), or dried and salted meat (similar to“beef jerky”).

Our main assumption about Sami cultural capital, S, is that it isfundamentally a function of the stock of reindeer, R, used in reindeerhusbandry.1 Assume that the change in the cultural stock, dS/dt,depends on current cultural stock, S, some exogenously given policyparameter vector, x,2 and the change in the reindeer stock, dR/dt. Wewrite this relationship as follows;

dS= dt = hðdR= dt; S;xÞ = hðR; L1; S;xÞ ð2Þ

h is homogenous of degree unity in L1, S and x, but not in R due to thenon-linearity of the biomass growth function, z(R). The latter hasimplications for our accounting exercise. More on this matter furtherdown below.

Furthermore, assume that production of consumer and investmentgoods is given by

C + I = f ðK; L–L1; gðR; L1ÞÞ ð3Þ

where (as before) C is consumption, I=dK /dt+δK is gross investmentinman-madecapital, and L is thefixedamount of total labor (productionis assumed homogenous of degree unity in its arguments).

The utility function has consumption and culture as argumentsand is separable:

UðC; SÞ = UðuCðCÞ; uSðSÞÞ:

1 This connection between culture and reindeers is widely recognized among theSami, see e.g. Parks et al. (2002).

2 The most relevant policy parameters being the per kilo meat SEK subsidy, and asubsidy for reindeers killed by carnivores. However, other parameters such as the Samipeople's unsufructuary right to use certain land areas also have an important impacton the development of the Sami culture.

The economy strives to maximize the discounted infinite flow ofutility such that Eqs. (1)–(3) and initial conditions K(0)=K0, R(0)=R0,and S(0)=S0, are satisfied. We assume that the first derivatives of U(·)w.r.t. C and S are positive and the second derivatives are negative(concavity).

The current value Hamiltonian for this problem is

H = UðC; SÞ + λ½ f ðK;X; gðR; L1ÞÞ–C−δK � + μ½zðRÞ–gðR; L1Þ� + θhðR; L1; S;xÞð4Þ

where X=(L−L1), and λ, μ, and θ are co-state variables. Beside thecommonplace transversality conditions, the optimal conditions thenbecomes (sub-index indicate derivative, except for L1)

dH = dC = 0 or UC = λ ð5Þ

dH = dL1 = 0 or ½ fX– fggL1 �λ + μgL1−ðθ = λÞhL1 = 0 ð6Þ

−dH = dK = dλ = dt−rλ or r−ðdλ = dtÞ= iK = fK−δ ð7Þ

−dH = dR = dμ = dt–rμ or

r–ðdμ = dtÞ = μ = iR = fggRðλ = μÞ + ðzR−gRÞ + ðθ= μÞhR ð8Þ

(where hR=h(dR /dt)(dR/dt)R)

−dH = dS = dθ= dt–rθ or r–ðdθ= dtÞ = θ = iS = ðUS = θÞ + hS: ð9Þ

We now insert these conditions into a SAM using the followingprocedure; normalize the optimal conditions by dividing through bythe marginal utility of income, UC=λ, to obtain SEK-values, thenmultiply each optimality condition with its “corresponding variable”,and — after some re-arranging — then insert them into the SAM(Table 1). Next, linearize the utility function with respect to privateconsumption, C, before inserting it into the household column in theSAM (to get C in Table 1).

First, let us take a closer look at the household “income”-row (H).Recognizing that iK=r−(dλ/dt)/λwe reformulate the R- and S-rate ofinterests, iR=r−(dμ/dt)/μ and iS=r−(dθ/dt)/θ, and rewrite (μ/λ)iRR and (θ/λ)iSS to become

iK ðμ = λÞR–½dðμ = λÞ= dt�R + iKðθ= λÞR–½dðθ= λÞ = dt�S + ðμ = λÞ½z−zRR�:ð10Þ

Total income for households is then

KiK + LfX + iK ðμ = λÞR + iK ðθ= λÞS–½dðμ = λÞ = dt�R–½dðθ= λÞ= dt�S

+ ðμ = λÞ½z−zRR� + hðdR=dtÞðθ= λÞ½z−zRR�:

ð11Þ

The first two terms are income from man-made capital and labor.The third and fourth terms represent interest rate on natural andcultural capitals. The following two terms are capital gains/losses onnatural and cultural capitals that occur due to changing stock prices.The last two terms are “surplus” incomes accruing to the harvestingsector and cultural capital due to the non-linearity in the reindeerbiomass growth function, z(R).

The household column is the linearized, SEK-valued, current valueHamiltonian (LSCVH), which in national accounting has beenrecognized to represent net national product, NNP (see e.g. Mäler,1991, or Weitzman, 2000).3 The household column, NNP, reducesconveniently to

C + I–δK + ðμ = λÞðdR= dtÞ + ðθ= λÞðdS= dtÞ + ðUS = λÞS: ð12Þ

3 This interpretation has been challenged recently, see e.g. Dasgupta (2009).

Table 1Social accounting matrix (non-renewable resource, R-capital, and cultural resource, S-capital).

Receipts→expenditures ↓

Consumption andK-investment

K L R S H

Consumption andK-investment

C+ I

K KfK −δKL XfX −gL1(μ /λ− fg)L1−(θ /λ)hL1R gfg −gR(μ /λ− fg)R+(θ /λ)hRR−g fg+(μ /λ)z+h(dR /dt)(θ /λ)zS (US /λ)S+(θ /λ)hS SH KiK LfX (μ /λ)iRR+(μ /λ)[z−zRR]

+h(dR /dt)(θ /λ)[z−zRR](θ /λ)iSS

654 G. Bostedt, T. Lundgren / Ecological Economics 69 (2010) 651-657

That is, consumption and net changes in the man-made capital,reindeer and cultural stocks (in monetary terms), plus a term whichrepresents the “consumption” (or disutility in case of negativemarginal utility of S) of Sami culture in the economy. NNP is nowthe conventional NNP, C+I−δK, plus a natural resource term, (μ /λ)(dR /dt), and two terms which are related to cultural capital, (θ /λ)(dS /dt)+(US /λ)S.

If the owners of S-capital would be compensated for upholding thecultural stock in each period of time, (θ /λ)(dS /dt)+(US /λ)S wouldbe the theoretically sound amount. Assuming a steady state economythis amount reduces to (US /λ)S, i.e. the value of cultural capital as aconsumption good. We can think of it as if the economy would “pay”the S-sector to be able to “consume” culture in each time period. Canwe observe such a value or amount in reality? Let us assume that thereis a per kilo subsidy, τ, to the reindeer industry which is society'svaluation of the existence of a Sami culture. Then society's valuation ofthe Sami culture in each time period is equivalent to τg(R,L1),assuming that the harvest is measured in kilos. If the subsidy is areflection of the true contribution of cultural capital to the economy,then

τgðR; L1Þ = ðUS =UCÞS ð13Þ

so that optimal subsidy per kilo harvested reindeer meat is given by

τ = ðUS =UCÞðS = gðR; L1ÞÞ = τðUSð + Þ;UCð−Þ; Sð + Þ;Rð−Þ; L1ð−ÞÞ:ð14Þ

This implies that, along the optimal paths of controls and stocks,the correct per kilo subsidy is positively related to marginal utility andcurrent level of Sami culture, and negatively related to size of reindeerstock and labor allocated to reindeer herding.

Furthermore, the total compensation to the R- and S-sectors (bothrelated to the Sami) of the economy would be

fggðR; L1Þ + τgðR; L1Þ = ðfg + τÞgðR; L1Þ: ð15Þ

Table 2Social accounting matrix (non-renewable resource, R-capital, and cultural resource, S-capitaof cultural capital.

Receipts→expenditures ↓

Consumption andK-investment

K L R

Consumption andK-investment

K KfKL XfXR gfgS τgH KiK LfX (μ /λ)iRR+(μ /λ)[z−

+h(dR / dt)(θ /λ)[z−z

This implies that the Sami reindeer herders can sell their meat atcompetitive price fg and in addition receive a “cultural” per kilosubsidy, τ, which can be interpreted as compensation to owners ofcultural capital. Whether the current government subsidy actually is atrue reflection of the economy's “consumption” of Sami culture isultimately an empirical question, which will be the main focus of thenext section. In Sweden, a subsidy for reindeer herding wasintroduced in 1973 and was meant to mimic the subsidies that werealready paid to farmers in northern Sweden to promote agriculturaldevelopment in this unfavorable climate region. Thus there was noexplicit reference to the cultural importance of the Sami reindeerhusbandry, although in recent year this importance has beenhighlighted. Today the subsidy is designed to equal 25% of revenuesfrom reindeer meat sales (Statistics Sweden, 1999). Note here that thesubsidy is not directly aimed at the reindeer stock itself. Should thesubsidy fall short of τ(US,UC,S,R,L1), the reindeer stocks will be lower/higher than optimal.

We illustrate the correct compensation to the owners of culturalcapital in Table 2. The social planner re-directs income from thehouseholds (e.g. tax) to the native Sami, which are the upholders ofthe cultural heritage. In Table 2 this is highlighted by bold face letters.

3. Estimating the value of cultural heritage: an exploratory study

To attempt to empirically estimate the cultural benefits of theSwedish reindeer industry, i.e. the value (US /UC)S, stated preferenceapproaches are virtually the only option, since there are very few waysfor an individual to demonstrate their valuation that can be estimatedthrough a revealed preference approach. We have chosen to use themail version of the Contingent Valuationmethod (CVM) to estimate thecultural benefits of Swedish reindeer husbandry for a national sample ofSwedish citizens.

The CVM questionnaire consisted of 18 questions (the question-naire in Swedish is available upon request). A set of 5 general attitudequestions was followed by the contingent valuation scenario and twodiscrete choice valuation questions. In the scenario the respondent isasked to assume that Swedish reindeer husbandry will cease to exist

l) with social planner re-directing compensation τg from the households to the owners

S H

C+ I

−δK−gL1(μ /λ− fg)L1−(θ /λ)hL1−gR(μ /λ− fg)R+(θ /λ)hRR−gfg+(μ /λ)z+h(dR / dt)(θ /λ)z(US /λ)S+(θ /λ)hSS

zRR]RR]

(θ /λ)iSS −τg

655G. Bostedt, T. Lundgren / Ecological Economics 69 (2010) 651-657

unless the government continues to financially support the industry.It was emphasized that this financial support is dependent on therespondents' valuation of reindeer husbandry. The first discretechoice (DC) valuation question was a so-called “spike” question (cf.Kriström, 1997), asking respondents whether they had any positivevaluation of maintaining Swedish reindeer husbandry at the presentlevel at all. Those who answered yes to this question was, in thesecond DC question, asked whether they were willing to pay a givenamount yearly in tax to maintain Swedish reindeer husbandry at thepresent level. Thus the valuation questionwas an equivalent valuation(EV)measure. This “all-or-nothing” scenario might seem extreme andlimits the opportunities for calculating marginal WTP. It was chosendespite these disadvantages for practical survey reasons since mostSwedes have limited knowledge of reindeer husbandry and wouldhave trouble relating to a marginal change in its size. It should beemphasized that 50% of the sample received an extended version ofthis second valuation question. Here information was given thatreindeer husbandry is a prerequisite for the Sami culture and that thebasis for this culture is removed should reindeer husbandry bediscontinued. After pretesting through focus groups a bid vector withsix bids (SEK 10, 20, 50, 100, 500 and 2000) was decided upon.Previous CVM research (e.g. Boman and Bostedt, 1999; Carson et al.,1994; Li and Mattsson, 1993; Kriström, 1990) shows that thedistribution of WTP is typically highly skewed, i.e. influenced byrelatively few respondents with high WTP values, explaining the needfor a strongly progressive bid vector. The questionnaire endedwith a setof questions concerning demographic characteristics of the respondent.

After two focus group pre-tests the questionnaire was mailed to anational sample of 1200 Swedish respondents aged between 18 and75 years. All respondents were randomly selected from the SwedishOfficial Register of Persons and Addresses (SPAR), which shouldenhance representativeness of the sample. In-person interviews werenot chosen due to budgetary limitations, and telephone interviewswere not deemed to be an alternative due to the impossibility inproviding visual information (e.g. maps). As mentioned, 600 of therespondents received a questionnaire with the extended version ofthe second DC question. After two remainders the response rate was49%. A comparison between sample means and their respectivenational counterparts for certain socioeconomic variables showedthat the sample is representativewith respect to sex, but slightly older(sample mean: 48.9 years; national mean: 45.2 years)4, more edu-cated (sample mean: 2.76 on a scale from one to five; national mean:2.07) and had slightly higher household income (sample mean: SEK358 621; national mean: SEK 332 833) than the national average.Differences were small however, and are likely to affect benefitestimates only to the extent that these socioeconomic variables arecorrelated to responses of the valuation questions. Concerning generalattitudes one attitude question asked what the respondents felt wasthemost important role of reindeer husbandry in the Swedish society,where the response alternatives were:

• Provide employment• Maintain a cultural heritage• Contribute to a living countryside• Contribute to biological diversity• Other, specify• Does not contribute in any way.

Responses showed that 52% felt that maintaining a culturalheritage was the most important role played by reindeer husbandry,while 23% answered “contribute to a living countryside”. Thissupports our argument that the Sami are an important producer ofcultural capital.

4 National mean values are from Statistics Sweden (2008).

Of the respondents 44% answered no to the first DC (the “spike”)question, thereby indicating willingness-to-pay (WTP) of zero.Furthermore, of those who answered yes, indicating a WTP>0, nosignificant difference was found between the two informationtreatments, an interesting finding in itself. Apparently, additionalinformation that reindeer husbandry is a prerequisite for the Samiculture does not influence valuation responses. One interpretationcould be that respondents already are aware of this fact. In thefollowing the two versions are merged to one sample. A firstimpression of the second DC valuation question can be gained byplotting the percent responding yes to the stated bid against the bidand interpolating linearly between these points, see Fig. 1.

As Fig. 1 shows almost 50% of the respondents that were in themarket, i.e. answered yes to the first DC (spike) question, and weresubjected to the highest bid, SEK 2000 (∼USD 251, January 2009),responded yes to this bid. As been shown by Kriström (1990) the areaunder the graph in Fig. 1 can be used as a non-parametric measure ofthe mean WTP for the respondents that were in the market. This is byvirtue of the fact that the point observations in Fig. 1 can beinterpreted as maximum likelihood observations of the cumulativedistribution function for WTP (cf. Ayer et al., 1955). Using thisprocedure and multiplying the result by 0.56, the share of therespondents that were in the market, gives a mean WTP of SEK 1094(∼USD 137, January 2009) and a median of SEK 141 (∼USD 17.5,January 2009) per year. The large difference between mean andmedian is due to the skewness of the valuation function with almosthalf the respondents not being willing to pay anything while aminority were willing to pay in excess of SEK 2000. This is a commonfeature of responses to non-market valuation questions.

An alternative to this non-parametric procedure involves decidingon a valuation functional form and a distributional assumption.Assuming that the probability of receiving a yes-response can bedescribed by a cumulative distribution function of the bid, B, andother variables, ci, G(B,ci)then:

Prob:ðyesÞ = Prob:ðWTP≥BÞ = GðB; ciÞ ð16Þ

the log-likelihood function can be formulated as:

lnðLÞ = ∑n

i=1½Di · ln½GðB; ciÞ� + ð1−DiÞ · ln½1−GðB; ciÞ�� ð17Þ

where Di is a dummy variable with Di=1 if the individual answeredyes to the DC question and Di=0 if the individual answered no. Thefunction G(B,ci) is a general expression of the functional form of B.For this parametric estimation the normal distribution was chosen forG(B), and the linear functional form was chosen. Initially, no

Fig. 1. Percent yes to discrete choice bids in the survey.

656 G. Bostedt, T. Lundgren / Ecological Economics 69 (2010) 651-657

socioeconomic or attitude variables were included. The results of thisestimation can be found in Table 3.

Based on the parameter estimates from Table 4 parametric welfaremeasures were calculated numerically by integrating from zero to SEK10,000 (when the probability of a yes was reduced to 3.19⁎10−17)and again multiplying the result by 0.56, the share of the respondentsthat were in the market, resulting in a mean of SEK 1043 (∼USD 130,January 2009) and a median of SEK 237 (∼USD 29.6, January 2009)per year, the large difference again being due to the skewness of thevaluation function. The similarity between the parametric and non-parametric means is notable. An estimationwas also conductedwhichincluded attitudinal and socioeconomic covariates in the ci vector,such as “perceived importance of reindeer husbandry”, “perceivedimportance of Sami culture”, as well as respondents' gender, age,education level, household size, income, and regional dummies. Theresults showed that the attitudinal variables “perceived importance ofreindeer husbandry”, and “perceived importance of Sami culture”were both significant (t-value 3.50 and 4.43, respectively), while theonly significant socioeconomic variable was education level (t-value:1.90), where respondents with longer education were more likely tosay yes to the DC question and some of the regional dummies. Therewas however no trend in the values of the regional coefficients thatwas related to geographical proximity to reindeer husbandry.

Arguably the median is a more politically useful measure of thecultural benefits of the Swedish reindeer industry, being an amount of50% of the respondents would agree to pay. Multiplying the medianestimates with the number of households in Sweden suggests that theSwedish reindeer industry produces cultural benefits in the neighbor-hood of SEK 500–900 million (∼USD 62–112 million, January 2009)annually, or around 2 to 4 times the turnover of the industry. It is notunreasonable however, that the cultural importance of this industry ismuch larger than its importance in terms of turnover. These figures canbe used to calculate the correct per kg compensation to the owners ofcultural capital. Using a rough figure of 260,000 reindeer in Sweden(Statistics Sweden, 2008), and an average carcass weight of 31.6 kg perreindeer on the average, Bostedt (2001), gives a figure of around SEK60–100per kg reindeermeat (∼USD7.3–12.2, January 2009)annually. Ifwe only consider the reindeers being slaughtered, 56,392 reindeers peryear (average 1998–2007), this figure becomes noticeably larger; SEK280–500 per kg (the current actual subsidy is about SEK 10–15 per kg,which is considerably lower). It should be stressed that the per kilosubsidy is not the only type of government support that the reindeerindustry receives. Other examples are support for adverse grazingconditions, and a non-market value of the usufructuary grazing rights toprivate forest land.

Here it should be remembered that the “all-or-nothing” scenarioimplies that the benefit estimates most likely are overestimates of themarginal WTP value one would ideally need to reach an optimal levelof reindeer production. However, as a measure of totalWTP tomaintaincultural capital at current level it is not necessarily an inadequatemeasure. TheCVMestimates reached in this study should be interpretedwith this in mind.

Table 3Estimated valuation function, based on the normal distribution.

Variable Coefficient T-value Standard deviation

Constant 1.785 12.427⁎⁎⁎ 0.144Bid −0.001 −7.940⁎⁎⁎ 0.000n=315Log likelihood=−85.895Restricted loglikelihood=−119.893

McFadden R2=0.284

⁎⁎⁎ Significant at 99% level.

4. Conclusion

Measuring welfare and economic development has been occupyingeconomists for many years. As discussed in the literature, simply usingsomemeasure of production or some income variable, is a rather bluntmeasurement of welfare. In this paper we develop a theoretical modelwhich incorporates cultural capital into a simple dynamic economy,something which to our knowledge has never been done before. TheSwedish reindeer industry, conducted by the pastoralist Sami, is used toshow thepotential importanceof incorporating cultural resource stocks.However, the model is completely general and applicable to severalother settings that involve cultural capital, especially pastoralistcultures. The main conclusion — as in many other similar studies ofeconomic growth and natural capital — is that the income andproduction accounts of the economy will be augmented with incomeflowsand thevalueofnet changes of thenatural and cultural stocks. Thisis important since traditional welfare accounting methods wouldunderestimate the welfare importance of a natural resource dependentpastoralist culture. TheSwedish reindeer industry is a case inpoint— theeconomic contribution of this industry to the standard NNP measure isextremely small despite its great cultural importance.

Furthermore, in our analysis of cultural capital, we specificallyinvestigate how to set the theoretically correct per kilo meat subsidy tocompensate/punish the reindeer sector of the economy for upholdingthe Sami cultural heritage in northern Sweden. Assuming that the socialplanner of the economy, or the market, can identify the value of theculture being “consumed”, in each period, the total SEK subsidy shouldbe set so that harvested kilos of meat times the subsidy per kilo is equalto this value. Obviously, identifying the period-to-period consumptionof a cultural stock, or even identifying inmonetary or physical terms theactual stock itself, is not a trivial task indeed. Should the compensationbe insufficient to compensate for the value of the Sami culture being“consumed” in each period reindeer stocks will be too small and somereindeer herders will leave the business altogether.

In the empirical section of the paper we attempted to estimate thecultural benefits of the Swedish reindeer industry through acontingent valuation (CVM) survey, directed to a national sample ofSwedes. Estimates reveal that these benefits are 2 to 4 times largerthan the annual turnover of the reindeer herding industry. This is notunreasonable however, given that the contribution to the standardNNP measure is quite small and the cultural importance is generallyregarded as large. Even though reindeer meat is available in mostSwedish supermarkets responses to attitude questions in the CVMsurvey confirm that the main function of reindeer husbandry is touphold a cultural heritage (slightly more than 50% thought this wasthe most important function). That the “all-or-nothing” scenario usedin the CVM survey implies however that the results are an upperbound of the marginal WTP value one would ideally need to reach anoptimal level of reindeer production. For this reason, the CVMestimates obtained should be interpreted with some caution.

This study illustrates the importance of incorporating culturalstocks in resource accounting. Failing to do so can potentially lead toserious policy mistakes, e.g. through setting subsidies too large or toosmall. According to the insights from the present study, futureresearch should pay closer attention to the potential importance ofcultural benefits provided by natural resource dependent industries.

Acknowledgments

This research was supported by theMountain Mistra and theMistraSustainable Investments research programs as well as the Swedish EPAprogram PlusMinus. We are grateful to Master of Forestry SamuelEgbäck for administering the practicalities of the contingent valuationsurvey. Comments from Runar Brännlund, John Hartwick, BengtKriström, Karl-Gustav Löfgren, Camilla Sandström, and Camilla Wid-mark, participants at the Western Agricultural Economics Association's

657G. Bostedt, T. Lundgren / Ecological Economics 69 (2010) 651-657

annualmeeting in Anchorage, AK-US, June 2006, and at the 2009 EAEREmeeting in Amsterdam (especially Susana Ferreira), are gratefullyacknowledged. The usual disclaimer applies. Part of the research in thisarticle was conducted while T. Lundgren was a visiting scholar at theDepartment of Economics, University of Otago, NZ, July–September,2005.

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