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Demand and Welfare Effects in Recreational Travel Models: A Bivariate Count Data Approach

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  • Hellström, Jörgen

    ()
    (Department of Economics, Umeå University)

  • Nordström, Jonas

    ()
    (Department of Economics, Umeå University)

Abstract

In this paper we present a non-linear demand system for households' joint choice of number of trips and days to spend at a destination. The approach, which facilitates welfare analysis of exogenous policy and price changes, is used empirically to study the effects of an increased CO2 tax. In the empirical study, a bivariate zero-inflated Poisson lognormal regression model is introduced in order to accommodate the large number of zeroes in the sample. The welfare analysis reveals that the equivalent variation (EV) measure, for the count data demand system, can be seen as an upper bound for the households welfare loss. Approximating the welfare loss by the change in consumer surplus, accounting for the positive effect from longer stays, imposes a lower bound on the households welfare loss. From a distributional point of view, the results reveal that the CO2 tax reform is regressive, in the sense that low income households carry a larger part of the tax burden.

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Bibliographic Info

Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 648.

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Length: 24 pages
Date of creation: 25 Feb 2005
Date of revision:
Handle: RePEc:hhs:umnees:0648

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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Web page: http://www.econ.umu.se/
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Keywords: demand analysis; welfare effects; count data; bivariate zero inflation;

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References

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  1. Morey, Edward R. & Shaw, W. Douglass & Rowe, Robert D., 1991. "A discrete-choice model of recreational participation, site choice, and activity valuation when complete trip data are not available," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 181-201, March.
  2. Brannlund, Runar & Nordstrom, Jonas, 2004. "Carbon tax simulations using a household demand model," European Economic Review, Elsevier, vol. 48(1), pages 211-233, February.
  3. Englin, Jeffrey & Shonkwiler, J S, 1995. "Estimating Social Welfare Using Count Data Models: An Application to Long-Run Recreation Demand under Conditions of Endogenous Stratification and Truncation," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 104-12, February.
  4. Berman, Matthew D. & Kim, Hong Jin, 1999. "Endogenous On-Site Time In The Recreation Demand Model," 1999 Annual meeting, August 8-11, Nashville, TN 21616, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Matthew D. Berman & Hong Jin Kim, 1999. "Endogenous On-Site Time in the Recreation Demand Model," Land Economics, University of Wisconsin Press, vol. 75(4), pages 603-619.
  6. Chib, Siddhartha & Winkelmann, Rainer, 2001. "Markov Chain Monte Carlo Analysis of Correlated Count Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 428-35, October.
  7. Murat K. Munkin & Pravin K. Trivedi, 1999. "Simulated maximum likelihood estimation of multivariate mixed-Poisson regression models, with application," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 29-48.
  8. Rainer Winkelmann, 2002. "Health Care Reform and the Number of Doctor Visits – An Econometric Analysis," SOI - Working Papers 0210, Socioeconomic Institute - University of Zurich.
  9. Jeffrey T. LaFrance, 1990. "Incomplete Demand Systems And Semilogarithmic Demand Models," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 34(2), pages 118-131, 08.
  10. Epstein, Larry G, 1982. "Integrability of Incomplete Systems of Demand Functions," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 411-25, July.
  11. Gurmu, Shiferaw & Trivedi, Pravin K, 1996. "Excess Zeros in Count Models for Recreational Trips," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(4), pages 469-77, October.
  12. Epstein, L, 1975. "A Disaggregate Analysis of Consumer Choice under Uncertainty," Econometrica, Econometric Society, vol. 43(5-6), pages 877-92, Sept.-Nov.
  13. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-51, July.
  14. Jeffrey T. LaFrance & W. Michael Hanemann, 1989. "The Dual Structure of Incomplete Demand Systems," Development Research Unit Working Paper Series archive-21, Monash University, Department of Economics.
  15. Douglas M. Larson, 1993. "Joint Recreation Choices and Implied Values of Time," Land Economics, University of Wisconsin Press, vol. 69(3), pages 270-286.
  16. Jeffrey Englin & Peter Boxall & David Watson, 1998. "Modeling Recreation Demand in a Poisson System of Equations: An Analysis of the Impact of International Exchange Rates," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(2), pages 255-263.
  17. W. Douglass Shaw & Peter Feather, 1999. "Possibilities for Including the Opportunity Cost of Time in Recreation Demand Systems," Land Economics, University of Wisconsin Press, vol. 75(4), pages 592-602.
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Cited by:
  1. Jörgen Hellström & Jonas Nordström, 2008. "A count data model with endogenous household specific censoring: the number of nights to stay," Empirical Economics, Springer, vol. 35(1), pages 179-192, August.

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