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Using Revealed Preference Behavioral Models to Correctly Account for Substitution Effects in Economic Impact Analysis

Author

Listed:
  • Deisentroth, Daniel B.
  • Loomis, John B.
  • Bond, Craig A.

Abstract

This study presents a methodology to correctly account for substitution patterns in estimates of final demand used in economic impact analysis. Then, this methodology is demonstrated empirically using recreational tourism data. Specifically, this study a) presents the results of a behavioral model for recreation demand; b) uses the predictions from this model to drive changes in final demand for an input-output economic impact model; and c) presents results from this impact model, contrasting them with the naïve assumption of no/limited substitution. Empirical results indicate that failure to account for substitution in final demand could result in gross overestimates of economic impacts.

Suggested Citation

  • Deisentroth, Daniel B. & Loomis, John B. & Bond, Craig A., 2013. "Using Revealed Preference Behavioral Models to Correctly Account for Substitution Effects in Economic Impact Analysis," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 43(2).
    • Handle: RePEc:ags:jrapmc:243955
    DOI: 10.22004/ag.econ.243955
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    References listed on IDEAS

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    1. Watson, Philip & Wilson, Joshua & Thilmany, Dawn D. & Winter, Susan, 2007. "Determining Economic Contributions and Impacts: What is the difference and why do we care?," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 37(2), pages 1-7.
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    4. Timothy C. Haab & Kenneth E. McConnell, 2002. "Valuing Environmental and Natural Resources," Books, Edward Elgar Publishing, number 2427.
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    7. Bergstrom, John C. & Teasley, R. Jeff & Cordell, H. Ken & Souter, Ray A. & English, Donald B.K., 1996. "Effects Of Reservoir Aquatic Plant Management On Recreational Expenditures And Regional Economic Activity," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(2), pages 1-14, December.
    8. Edward R. Morey & Robert D. Rowe & Michael Watson, 1993. "A Repeated Nested-Logit Model of Atlantic Salmon Fishing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(3), pages 578-592.
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    10. Joseph A. Herriges & Catherine L. Kling (ed.), 1999. "Valuing Recreation and the Environment," Books, Edward Elgar Publishing, number 1315.
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