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Should We Trust Hypothetical Referenda? Test and Identification Problems

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Author Info
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)

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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.

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File URL: http://hdl.handle.net/2077/2730
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Publisher Info
Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number 189.

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Length: 12 pages
Date of creation: 19 Jan 2006
Date of revision: 24 Jan 2006
Handle: RePEc:hhs:gunwpe:0189

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Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research
Keywords: Hypothetical referenda; incentive compatibility; non-market valuation; identification;

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Yatchew, Adonis & Griliches, Zvi, 1985. "Specification Error in Probit Models," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 134-39, February. [Downloadable!] (restricted)
  2. Davidson, Russell & MacKinnon, James G., 1984. "Convenient specification tests for logit and probit models," Journal of Econometrics, Elsevier, vol. 25(3), pages 241-262, July. [Downloadable!] (restricted)
    Other versions:
  3. Cameron, Trudy Ann & Poe, Gregory L. & Ethier, Robert G. & Schulze, William D., 2002. "Alternative Non-market Value-Elicitation Methods: Are the Underlying Preferences the Same?," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 391-425, November. [Downloadable!] (restricted)
  4. Vossler, Christian A. & Kerkvliet, Joe, 2003. "A criterion validity test of the contingent valuation method: comparing hypothetical and actual voting behavior for a public referendum," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 631-649, May. [Downloadable!] (restricted)
  5. Trudy Ann Cameron & Michelle D. James, 1986. "Efficient Estimation Methods for "Closed-Ended" Contingent Valuation Surveys," UCLA Economics Working Papers 404, UCLA Department of Economics. [Downloadable!]
    Other versions:
  6. Cummings, Ronald G, et al, 1997. "Are Hypothetical Referenda Incentive Compatible?," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 609-21, June.
  7. John A. List & Robert P. Berrens & Alok K. Bohara & Joe Kerkvliet, 2004. "Examining the Role of Social Isolation on Stated Preferences," American Economic Review, American Economic Association, vol. 94(3), pages 741-752, June. [Downloadable!]
  8. Timothy C. Haab & Ju-Chin Huang & John C. Whitehead, . "Are Hypothetical Referenda Incentive Compatible? A Comment," Working Papers 9708, East Carolina University, Department of Economics. [Downloadable!]
    Other versions:
  9. Kiefer, Nicholas M & Skoog, Gary R, 1984. "Local Asymptotic Specification Error Analysis," Econometrica, Econometric Society, vol. 52(4), pages 873-85, July. [Downloadable!] (restricted)
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