Welfare Estimation Using Aggregate and Individual-Observations Models: A Comparison Using Monte Carlo Techniques

Hellerstein, Daniel (1995): Welfare Estimation Using Aggregate and Individual-Observations Models: A Comparison Using Monte Carlo Techniques. Published in: American Journal of Agricultural Economics , Vol. 3, No. 77 (August 1995): pp. 620-630.

Abstract

Due to the weak behavioral foundations of aggregate demand models, zonal travel cost models have been largely abandoned in favor of models based on individual observations. However, sample selection difficulties in individual-observation models often require the use of distribution-sensitive limited-dependent variables estimators. In this paper I use Monte-Carlo simulations to investigate whether the bias from aggregation is worse than possible bias from these narrowly specified estimators. Somewhat surprisingly, the results indicate that zonal models often outperform the individual-observation models, especially when using an aggregate model that incorporates intrazonal variance of the explanatory variables.

• Item Type: MPRA Paper
• Language: English
• Keywords: aggregation bias, individual-observation models, zonal models.
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C43 - Index Numbers and Aggregation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects

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