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Bootstrapping in Applied Welfare Analysis

Author

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  • Catherine L. Kling
  • Richard J. Sexton

Abstract

Bootstrapping procedures are used to estimate the statistical properties of common empirical welfare measures. Results from a Monte Carlo experiment indicate that welfare estimates such as Marshallian consumer surplus often exhibit significant bias. Standard errors of welfare estimates are found to often exceed the magnitude of the point estimate for typical cross-section data sets and are generally larger than the difference between comparable Hicksian and Marshallian measures. Precision of welfare estimates can be markedly enhanced through generating larger data sets, obtaining better model fits, and through imposition of innocuous inequality restrictions on the demand function parameters.

Suggested Citation

  • Catherine L. Kling & Richard J. Sexton, 1990. "Bootstrapping in Applied Welfare Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 406-418.
    • Handle: RePEc:oup:ajagec:v:72:y:1990:i:2:p:406-418.
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    File URL: http://hdl.handle.net/10.2307/1242343
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    1. Torres, Cati & Hanley, Nick & Riera, Antoni, 2011. "How wrong can you be? Implications of incorrect utility function specification for welfare measurement in choice experiments," Journal of Environmental Economics and Management, Elsevier, vol. 62(1), pages 111-121, July.
    2. Dixie Reaves & Randall Kramer & Thomas Holmes, 1999. "Does Question Format Matter? Valuing an Endangered Species," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 14(3), pages 365-383, October.
    3. Christiana E. Hilmer & Matthew T. Holt & Richard C. Bishop, 2010. "Bootstrapping Your Fish or Fishing for Bootstraps? Precision of Welfare Loss Estimates from a Globally Concave Inverse Demand Model of Commercial Fish Landings in the U.S. Great Lakes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(1), pages 98-112.
    4. Larson, Douglas & Lew, Daniel & Loomis, John, 1999. "Are Revealed Preference Measures of Quality Change Benefits Statistically Significant?," Western Region Archives 321712, Western Region - Western Extension Directors Association (WEDA).
    5. Dadakas, Dimitrios & Katranidis, Stelios D., 2006. "MFA Quotas Elimination: the Case of Cotton Yarn in Greece - a Multi-Market vs. a Single Market Analysis," 2006 Annual meeting, July 23-26, Long Beach, CA 21390, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Seung-Jun Kwak & Seung-Hoon Yoo & Sang-Yong Han, 2003. "Estimating the Public's Value for Urban Forest in the Seoul Metropolitan Area of Korea: A Contingent Valuation Study," Urban Studies, Urban Studies Journal Limited, vol. 40(11), pages 2207-2221, October.
    7. Jeong, Kyeong-Soo & Garcia, Philip & Bullock, David S., 2003. "A statistical method of multi-market welfare analysis applied to Japanese beef policy liberalization," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 237-256, April.
    8. Beatty, Timothy K.M. & Brozovic, Nicholas & Ward, Michael B., 2005. "Consumer Surplus Estimates and the Source of Regression Error," 2005 Annual meeting, July 24-27, Providence, RI 19477, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Dimitrios Dadakas & Stelios D. Katranidis, 2010. "The Effects of Trade Liberalization in Textiles and Clothing on the Greek Market for Cotton Yarn: A Multi‐Market Analysis," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 138-152, February.
    10. Bullock, David S. & Salhofer, Klaus, 2003. "Judging agricultural policies: a survey," Agricultural Economics, Blackwell, vol. 28(3), pages 225-243, May.
    11. D.S. Bullock & K. Salhofer, 1998. "Measuring the social costs of suboptimal combinations of policy instruments: A general framework and an example," Agricultural Economics, International Association of Agricultural Economists, vol. 18(3), pages 249-259, May.
    12. Dimitrios Dadakas & Stelios Katranidis, 2008. "Single Versus Multi-market Approach: An Application to the Greek Cotton Market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 36(4), pages 469-481, December.
    13. Kling, Catherine L., 1991. "Estimating the precision of welfare measures," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 244-259, November.
    14. Catalina M. Torres Figuerola & Nick Hanley & Antoni Riera Font, 2008. "The implications of incorrect utility function specification for welfare measurement in choice experiments," CRE Working Papers (Documents de treball del CRE) 2008/6, Centre de Recerca Econòmica (UIB ·"Sa Nostra").
    15. English, Donald B.K., 2000. "A Simple Procedure for Generating Confidence Intervals in Tourist Spending Profiles and Resulting Economic Impacts," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 30(1), pages 1-16.
    16. Chris Neher & David Patterson & John Duffield & Katherine Neher, 2019. "Convergent validity of alternative dependent variable specifications for individual travel cost models," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(2), pages 307-324, April.
    17. Bullock, David S. & Dadakas, Dimitrios & Katranidis, Stelios D., 2009. "Measuring the Effects of Technology Change in Multiple Markets : Application to the Greek Cotton Yarn Industry," MPRA Paper 67204, University Library of Munich, Germany, revised 2012.
    18. Mike Christie & Christopher D. Azevedo, 2009. "Testing the Consistency Between Standard Contingent Valuation, Repeated Contingent Valuation and Choice Experiments," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(1), pages 154-170, February.
    19. Carol Horton Tremblay & Victor J. Tremblay, 1995. "The Impact Of Cigarette Advertising On Consumer Surplus, Profit, And Social Welfare," Contemporary Economic Policy, Western Economic Association International, vol. 13(1), pages 113-124, January.

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