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Functional Form and the Statistical Properties of Welfare Measures

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  • Adamowicz, Wiktor L.
  • Fletcher, Jerald J.
  • Graham-Tomasi, Theodore

Abstract

This paper uses Monte Carlo analysis to compare the variance of consumer's surplus for several functional forms for demand. Although the semilog and linear forms fit the data well by statistical criteria, the coefficients of variation for consumer's surplus generated by these forms were substantially larger than for the double log and linear-log forms. While this paper is framed in the travel cost approach to recreational demand, there are implications for the choice of functional form whenever the measure of interest is a nonlinear transformation of the estimated parameters.
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Suggested Citation

  • Adamowicz, Wiktor L. & Fletcher, Jerald J. & Graham-Tomasi, Theodore, 1987. "Functional Form and the Statistical Properties of Welfare Measures," Staff Papers 200394, Purdue University, Department of Agricultural Economics.
    • Handle: RePEc:ags:puaesp:200394
    DOI: 10.22004/ag.econ.200394
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    References listed on IDEAS

    as
    1. McConnell, Kenneth E., 1985. "The economics of outdoor recreation," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 2, chapter 15, pages 677-722, Elsevier.
    2. Nancy E. Bockstael & Ivar E. Strand, Jr., 1987. "The Effect of Common Sources of Regression Error on Benefit Estimates," Land Economics, University of Wisconsin Press, vol. 63(1), pages 11-20.
    3. Elizabeth A. Wilman & Richard J. Pauls, 1987. "Sensitivity of Consumers' Surplus Estimates to Variation in the Parameters of the Travel Cost Model," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 35(1), pages 197-212, March.
    4. V. Kerry Smith & William H. Desvousges & Ann Fisher, 1986. "A Comparison of Direct and Indirect Methods for Estimating Environmental Benefits," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 280-290.
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