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Should We Trust Hypothetical Referenda? Test and Identification Problems

Author

Listed:
  • Carlsson, Fredrik

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Johansson-Stenman, Olof

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

In a paper published in the Journal of Political Economy, Cummings et al. experimentally compare hypothetical and real-money referenda. They reject the incentive compatibility hypothesis of hypothetical referenda. However, in a comment, Haab et al. claim that the hypothesis cannot be rejected if one corrects for heteroskedasticity. In this note we show that the methodology used by Haab et al. is flawed, and their conclusions unwarranted. Our results rather support the original conclusion that hypothetical referenda appears not to resemble real referenda (unless one has reasons to believe that the true variance is much larger in the hypothetical case). This paper outlines design and identification difficulties arising when statistically comparing real and hypothetical referenda.

Suggested Citation

  • Carlsson, Fredrik & Johansson-Stenman, Olof, 2006. "Should We Trust Hypothetical Referenda? Test and Identification Problems," Working Papers in Economics 189, University of Gothenburg, Department of Economics, revised 24 Jan 2006.
    • Handle: RePEc:hhs:gunwpe:0189
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    File URL: http://hdl.handle.net/2077/2730
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    References listed on IDEAS

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    More about this item

    Keywords

    Hypothetical referenda; incentive compatibility; non-market valuation; identification;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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