models for referendum data the structure of discrete choice models for contingent valuation abstract in 1979 bishop and heberlein introduced an appealing variant of the contingent valuation method which required only yes or no responses hanemann developed a utility theoretic interpretation of the yes no responses which has helped popularize the approach recently cameron has offered another interpretation also utility theoretic which she argues is more general than the hanemann random utility model this paper compares the deterministic models suggested by hanemann and cameron showing them to be dual to each other it shows that correct specification of either function must exclude endogenous variables such as quantity demanded it also demonstrates that using utility theoretic models allows one to compare travel cost models and contigent valuation models on the basis of their implied behavior not on the unobservable surplus or variation measure

statistical efficiency of double bounded dichotomous choice contingent valuation the statistical efficiency of conventional dichotomous choice contingent valuation surveys can be improved by asking each respondent a second dichotomous choice question which depends on the response to the first question if the first response is yes the second bid is some amount greater than the first bid while if the first response is no the second bid is some amount smaller this double bounded approach is shown to be asymptotically more efficient than the conventional singlebounded approach using data from a survey of californians regarding their willingness to pay for wetlands in the san joaquin valley we show that in a finite sample the gain in efficiency can be very substantial

exchange rate target zones a survey of the literature this work selectively reviews the literature on exchange rate target zones and their theoretical and empirical methodologies and examines whether they can be used to clarify to what extent this type of exchange rate regime could contribute to greater exchange rate stability we discuss the main contributions of the first and second generations of exchange rate target zone models in an attempt to reconcile the poor empirical performance of the krugman model with the reality of exchange rate target zone regimes this line of research integrates target zones with alternative underlying economic models such as imperfect credibility intra marginal interventions and sticky price models it was thus possible to understand the correlations observed between the exchange rate its fundamentals determinants and the interest rate differential and to explain the fact that the statistical distribution of the exchange rate is hump shaped rather than u shaped this implies that the initial emphasis of target zone models on nonlinearities honeymoon effect smooth pasting and marginal interventions has vanished exchange rate target zones are better described as similar to managed floating regimes with intra marginal interventions with some marginal interventions when the exchange rate reaches the edges of the floating band

semi nonparametric distribution free dichotomous choice contingent valuation abstract we apply a semi nonparametric distribution free estimator for binary discrete response data to the estimation of a dichotomous choice contingent valuation model using this estimator mean and median compensating and equivalent variation can be consistently estimated without making nontheoretically motivated assumptions on consumer preferences the approach is illustrated using a contingent valuation survey of willingness to pay for reduction of risk of premature death due to exposure to hazardous waste we find that a conventional parametric estimator and the proposed estimator give similar estimates of unconditional wtp but that conditional on explanatory variables the estimates are quite different

environmental pricing of externalities from different sources of electricity generation in chile abstract the rapid increase in electricity demand in chile means a choice must be made between major investments in renewable or non renewable sources for additional production current projects to develop large dams for hydropower in chilean patagonia impose an environmental price by damaging the natural environment on the other hand the increased use of fossil fuels entails an environmental price in terms of air pollution and greenhouse gas emissions contributing to climate change this paper studies the debate on future electricity supply in chile by investigating the preferences of households for a variety of different sources of electricity generation such as fossil fuels large hydropower in chilean patagonia and other renewable energy sources using double bounded dichotomous choice contingent valuation a novel advanced disclosure method and internal consistency test are used to elicit the willingness to pay for less environmentally damaging sources policy results suggest a strong preference for renewable energy sources with higher environmental prices imposed by consumers on electricity generated from fossil fuels than from large dams in chilean patagonia policy results further suggest the possibility of introducing incentives for renewable energy developments that would be supported by consumers through green tariffs or environmental premiums methodological findings suggest that advanced disclosure learning overcomes the problem of internal inconsistency in sb db estimates

deviations from purchasing power parity in the long run this paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods for a wide variety of countries and in both monthly and annual data since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism this paper will demonstrate that deviations from purchasing power parity ppp reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods for a wide variety of countries and in both monthly and annual data this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper therefore proposes an alternative explanation which does not presuppose free trade in goods but which instead relies on financial arbitrage in bonds as the underlying mechanism the major implication of the theory and the results is that ppp is as likely to be violated in the long as in the short run as an empirical matter deviations from ppp can be observed for most currencies at any instant see kravis et al 21 stockman 37 and genberg 15 among others these deviations are typically both cumulative and persistent the real exchange rate can remain on either side of parity for lengthy but variable time intervals of a year or more as a consequence the current consensus shared

political risk and export promotion evidence from germany political risk represents an important hidden transaction cost that reduces international trade this paper investigates the claim that german public export credit guarantees hermes guarantees mitigate this friction to trade flows and hence promote exports we employ an empirical trade gravity model where we explicitly control for political risk in the importing country in order to evaluate the effect of export guarantees the idea behind export promotion through public export credit agencies ecas is that the private market is unable to provide adequate insurance for all risks associated with exports as a consequence firms export activities are limited in the absence of insurance provision using a novel data set on guarantees we estimate the effect of guarantees in a static and dynamic panel model we find a statistically and economically significant positive effect of public export guarantees on exports which indicates that export promotion is indeed effective furthermore political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade

estimation using contingent valuation data from a dichotomous choice with follow up questionnaire reply abstract our original article proposed that the two yes no willingness to pay wtp responses produced by this survey format should be viewed as a pair of jointly distributed correlated discrete random variables the comparison model the conventional approach to estimation using these types of data contained a programming error correction alters the results from the comparison model but our original claim that estimation by conventional methods can produce misleading inferences if ours is the appropriate specification still stands this is especially true if negative wtp is precluded when e wtp is calculated

devaluation expectations the swedish krona 1982 1991 devaluation expectations for the swedish krona are estimated for the period 1982 1991 with several methods first the simplest test is applied under either only the minimal assumption of no positive minimum profit or the additional assumption of uncovered interest parity then a more precise method suggested by bertola and svensson is used in which expected rates of depreciation within the exchange rate band estimated in several ways are subtracted from interest rate differentials finally estimated devaluations expectations are to some extent explained by a few macrovariables and parliament elections

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

credibility of policies versus credibility of policymakers standard models of policy credibility defined as the expectation that an announced policy will be carried out emphasize the preferences of the policymaker and the role of tough policies in signaling toughness and raising credibility whether a policy is carried out however will also reflect the state of the economy we present a model in which a policymaker maintains a fixed parity in good times but devalues if the unemployment rate gets too high our main conclusion is that if there is persistence in unemployment observing a tough policy in a given period may lower rather than raise the credibility of a no devaluation pledge in subsequent periods we test this implication on ems interest rates and find support for our hypothesis

inflation convergence with realignments in a two speed europe in the first decade of its existence the european monetary system passed through three phases of realignments full accommodation partial accommodation and zero accommodation of inflation differentials but to what extent does the new freedom of capital movements rule out such gradual convergence with realignments for new members this paper uses a model with forward looking behavior in labor and financial markets to analyze this question a rule which partially accommodates inflation differentials is shown to be consistent with inflation convergence and perfect capital mobility provided the timing of realignments is stochastic and the rule is fully credible copyright 1992 by royal economic society

the collapse of purchasing power parities during the 1970 s one of the striking facts concerning the relationship beiveen prices and exchange rates during the 1970 s has been the dismal performance of the predictions of the simple versions of the purchasing power parity doctrine ppp that doctrine in its absolute version states that the equilibrium exchange rate between domestic and foreign currencies equals the ratio of domestic to foreign price levels the relative version of the doctrine relates equilibrium changes in exchange rates to changes in the ratio of domestic to foreign prices during the 1970 s short run changes in exchange rates bore little relationship to short run differentials in national inflation rates and frequently divergences from purchasing power parities have been cumulative this paper reviews and analyzes the empirical record of exchange rates and prices during the 1970 s and the analysis is based on the experience of the dollar pound the dollar frecch franc and the dollar dm exchange rates section 2 presents the evidence on ppp during the 1970 s and contrasts it with the evidence from the 1920 s a period during which the doctrine held up reasonably well this analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy the evidence regarding devia tions from purchasing power parities is also relevant for determining whether there is a case for managed float section 3 attempts to explain what went wrong with

economic evaluation of healthcare technology improving the quality of social life the case of assistive technology for the disabled and elderly abstractpublic investments in healthcare technology for the disabled and elderly to improve the quality of social life have been vigorous but the economic evaluation of the assistive technology is still lacking under this circumstance the purpose of this study is to analyse the socio economic value of developing assistive technologies with the potential to improve the quality of social life especially for disabled and elderly individuals based on a survey of 400 respondents the spike model a special form of the contingent valuation method cvm is applied to assess the value of assistive technologies in korea a household s willingness to pay wtp for the development of assistive technologies is us 4 26 per year on average in the form of a government levied tax although many people express zero wtp for the development of these technologies people with higher household savings higher levels of education and higher levels of charity donations have a higher wtp for the development of assistive

specification of the logit model the case of valuation of nonmarket goods abstract we address the proper specification of the logit model for estimation of nonmarket commodity demand economic theory is used to show the conditions which must be met by the logit functional form if it is to yield valid estimates of welfare change measures and demand relationships an empirical example is used to illustrate the argument recreational boating data were collected using the contingent valuation method cvm in texas in one instance the demand curve is positively sloped due to the specific functional form chosen the estimated demand curve for the theoretically preferred functional form has the expected negative slope

testing preference formation in learning design contingent valuation using advance information and repetitive treatments policymakers have largely replaced single bounded discrete choice valuation by the more statistically efficient repetitive method double bounded discrete choice and discrete choice experiments repetitive valuation permits classification into rational and irrational preferences 1 a priori well formed 2 consistent nonarbitrary values discovered through repetition and experience 3 consistent but arbitrary values as shaped by preceding bid level and 4 inconsistent and arbitrary values policy valuations should demonstrate behaviorally rational preferences we outline novel methods for testing this in double bounded discrete choice experiments applied to renewable energy premiums in chile

rational expectations and policy credibility following a change in regime we examine the dynamic path of an economy after a change in regime when neither the policy to be followed nor the reactions of the public are known the model is an application of kreps and wilson s reputation model to barro and gordon s macroeconomic policy game equilibrium is defined to be the dynamically consistent solution to a game between the government and the private sector it involves mixed strategies and bayesian learning by both sides until the uncertainty about government and public behaviour is resolved the absence of complete credibility of government policy and intransigence of private sector wage demands increase the output loss of disinflation the analysis also sheds light on the strategic nature of economic policymaking and the role of information in macroeconomics

assessing target zone credibility mean reversion and devaluation expectations in the erm 1979 1992 abstract the paper presents estimates of devaluation expectations for six erm currencies relative to the deutsche mark for the period march 1979 april 1992 both the simplest test and the drift adjustment method are used the simplest test adjusts interest rate differentials for the maximum and minimum expected rate of depreciation within the exchange rate band the drift adjustment method adjusts interest rate differentials by the estimated expected rate of depreciation within the band the latter method gives more precise estimates especially for short horizons and allows statistical inference and hypothesis testing expected rates of devaluation have generally fallen during the period still some devaluation expectations relative to the deutsche mark remain in 1992 except for the belgian luxembourg franc and the netherlands guilder expected rates of devaluation have fluctuated more than interest rate differentials

optimal bid selection for dichotomous choice contingent valuation surveys abstract this paper develops a model for optimal survey design for the dichotomous choice contingent valuation method that finds the bid amounts as well as the sample sizes corresponding to each bid the model uses an iterative procedure to select the survey design that minimizes the mean square error of the welfare measure a set of monte carlo simulations shows that the model produces significantly lower mean squared errors for the welfare estimate than the next best model produces survey design under alternative assumptions regarding the statistical distribution of the welfare measure is also addressed the model produced significantly different survey designs depending on whether the distribution was assumed to be symmetric or asymmetric

did the ems reduce the cost of capital we propose a dynamic arbitrage pricing theory apt multi factor model with time varying volatility for currency bond and stock returns for ten european countries over 1977 97 we exploit the cross sectional dimension of the model to construct world portfolios which when added to the original list of assets allow us to develop simple consistent methods of estimation and testing our results reject the implicit asset pricing restrictions and suggest decreases in idiosyncratic exchange rate risk tend to lower the cost of capital although the effect is small we assess the potential gains from increased stock market integration

expected and predicted realignments the ff dm exchange rate during the ems an empirical model of time varying realignment risk in an exchange rate target zone is developed expected rates of devaluation are estimated as the difference between interest rate differentials and estimated expected rates of depreciation within the exchange rate band using french franc deutsche mark data during the european monetary system the behavior of estimated expected rates of depreciation accord well with the theoretical model of bertola svensson 1990 we are also able to predict actial realignments with some success

devaluations and depreciation expectations in the ems this paper proposes a method to estimate separately the size of the expected depreciation in an eventual devaluation of the central parity in the erm and the probability assigned by agents to this devaluation occurring in the short run the proposed method complements the information provided by the jumps observed in market exchange rates around realignments with the information contained in interest rate differentials on the future behaviour of exchange rates the separation of probability and size allows a richer analysis of the effects of devaluations on exchange rate credibility in the erm

a new paradigm for valuing non market goods using referendum data maximum likelihood estimation by censored logistic regression abstract this paper challenges the w m hanemann amer j agr econom 66 332 341 1984 and c sellar j p chavas and j r stoll j environ econom management 13 382 390 1986 utilizations of logit models to estimate the value of non market resources from referendum survey data these data are more informative than conventional choice data the random utility interpretation of logit models is therefore too restrictive bypassing the utility function entirely it will be shown that parameters and standard errors for utility theoretic inverse hicksian demand functions can be extracted directly and much more simply estimated demand functions need not be limited to those corresponding to the linear in parameters utility difference specifications which can be handled by packaged logit programs

earmarking conservation further inquiry on scope effects in stated preference methods applied to nature based tourism abstract the way people assign value to nature conservation policies has important implications for management choices economic valuation surveys are affected by individual behavioural patterns that are not exhaustively explained by traditional sources of bias such as embedding flagship species fixed budget commodity misspecification and warm glows through a contingent valuation study of alpine wildlife we use an external scope test to evaluate the difference in willingness to pay among tourists for conservation policies targeted either to the ibex alone or to the four ungulates populating the gran paradiso national park in northwest italy ibex red deer roe deer chamois we find that park users are willing to contribute significantly more to policies protecting one of the four ungulates than all four of them a result that we argue should be ascribed to pure aversion to less specific policy objectives i e to a preference for punctual earmarking of resources devoted to conservation

the time variation of risk and return in the foreign exchange and stock markets this paper attempts to determine whether the fluctuations of conditional first and second moments which are observed for many assets are consistent with the sharpelintner mossin capital asset pricing model we test the mean variance model under several different assumptions about the time variation of conditional second moments of returns using weekly data from july 1974 to december 1986 that include returns on a portfolio composed of dollar deutsche mark sterling and swiss franc assets together with the u s stock market the results indicate that estimated conditional variances cannot explain the observed time variation of risk premia rates of return on international financial assets are characterized by statistical properties that are quite common to all financial markets they are highly volatile and largely unpredictable these properties make it very difficult to extract statistically reliable estimates of systematic exchange rate and assetprice movements and are at the root of the generally poor empirical performance of international asset pricing models nevertheless two important results have been uncovered by empirical researchers and can be considered a fair characterization of the data a expected returns on foreign assets vary over time cumby and obstfeld 1981 and the numerous articles that followed recently surveyed by frankel and meese 1987 b the volatility of returns of foreign assets also changes over time cumby and obstfeld 1984 hodrick and srivastava 1984 and hsieh 1988 among others as giovannini and jorion 1987 suggest the

learning and inflation convergence in the erm this paper develops a model where agents learn about the probability of devaluations in a fixed exchange rate regim e the true probability of devaluation is assumed to be low or zero b ut agents are initially unsure about the government s intentions and st art with a high prior belief bayesian updating dictates that private sector expectations are revised down during periods when no devaluat ion occurs but are sharply increased when a devaluation does occur thi s model of learning is embedded in a model of overlapping contracts to study the process of inflation convergence after erm entry the main results are that agents over estimate the authorities desired realignment rate so inflation will be high in anticipation but as the authorities do not actually devalue there is a terms of trade loss leading to recession before long run equilibrium in which agents correctly estimate realignment rates can be attained competitivenes s losses actually have to be regained by a sustained deflation copyright 1993 by royal economic society

export credit subsidies export credit subsidies jacques melitz and patrick messerlin in recent years governments have increasingly resorted to export credit subsidies the major motivation for the proliferation of such schemes seems to be macroeconomic rather than microeconomic in nature the conventional argument namely that they simultaneously increase demand and improve the current account is fundamentally flawed in ignoring the second round effects on prices and the exchange rate the authors investigate whether there is a valid macroeconomic case for export credit subsidies and find that temporary measures can be useful in reducing the recessionary costs of a disinflationary program by permitting a larger appreciation of the exchange rate during the initial stages of the program they also present detailed evidence on the impact across different industries of export credits in france these are heavily concentrated on a small number of industries specifically machine tools construction metalworking aircraft ships and electrical equipment the distortionary effect on industrial structure is consequently large and any beneficial macroeconomic benefits are likely to be outweighed by the microeconomic costs the case for export credit subsidies is not persuasive

if you have the flu symptoms your asymptomatic spouse may better answer the willingness to pay question evidence from a double bounded dichotomous choice model with heterogeneous anchoring the small sample size of contingent valuation cv surveys conducted in patients may have limited the use of the single bounded sb dichotomous choice format which is recommended in environmental economics in this paper we explore two ways to increase the statistical efficiency of the sb format 1 by the inclusion of proxies in addition to patients 2 by the addition of a follow up dichotomous question i e the double bounded db dichotomous choice format we found that patients n 223 and spouses n 64 answering on behalf of the patient had on average a similar willingness to pay for earlier alleviation of flu symptoms however a patient was significantly more likely to anchor his her answer on the first bid as compared to a spouse finally our original db model with shift effect and heterogeneous anchoring reconciled the discrepancies found in willingness to pay statistics between sb and db models in keeping with increased statistical efficiency

improved estimation of willingness to pay in dichotomous choice contingent valuation studies this paper uses recently developed statistical techniques to achieve improved parameter estimates from models ofdichotomoiis choice contingent valuation data random effects associated with bid amounts presented to respondents are modelled alongside the variance of individual responses to give a nested model which more truly reflects the structure of the data being analyzed quasi likelihood methods for estimating parameters in such hierarchical models are discussed and a simulation method for assessing goodness of fit is demonstrated however estimated parameters may still be biased and hence a parametric bootstrap technique is presented and compared to a delta method approximation jel q26

difficulties in valuing street light improvement trust surprise and bound effects previous empirical research has demonstrated an internal inconsistency that may occur in response strategies between the first and second valuations made to closed ended contingent valuation questions one possible explanation for this bound effect is the surprise of being asked the second valuation question which may be enhanced where there is a lack of trust this paper considers the use of closed ended contingent valuation to estimate non market benefits for an improved street lighting scheme where there is a lack of trust in the agency responsible for provision the results provide confirmation that surprise is an important determinant of bound effects however efforts to reduce such bias using a prior statement of the bid range were found to be ineffective in increasing trust and reducing surprise given the importance of this area of research directions for future research are considered

semiparametric estimation of the binary choice model for contingent valuation this paper is concerned with the estimation of the binary choice model without imposing any parametric structure on the distribution of the stochastic term we adapt the distribution free maximum l

nonlinearity and stationarity of inflation rates evidence from the euro zone countries earlier studies hardly reject the hypothesis of a unit root in inflation few studies have examined the possibility of nonlinearity in inflation and tested nonlinear stationarity of the inflation rates this study thus intends to fill the gap this study utilizes the tests for nonlinearity along with the unit root tests that allow for nonlinearity in the variables to examine the stationarity of inflation rates of 12 european countries that formed the euro zone ez later in the sample period the results suggest that the majority of these countries inflation rates can be characterized by mean reversion during the floating exchange rate period many of them appear to be nonlinear stationary this finding is essential in conducting applied economic studies for these countries when constructing models whose validity relies on whether or not inflation is stationary the results of this study also imply that shocks to inflation have a transitory effect on inflation in the euro area therefore it would be le

optimal experimental design for double bounded dichotomous choice contingent valuation the double bounded dichotomous choice model is becoming popular in the contingent valuation literature this technique considers the responses to two bids the second one being determined according to the response to the first and it has been shown to be statistically more efficient than the standard single bounded model in this paper the issue of the optimal choice of bid values for the double bounded logit model is addressed these designs are derived to satisfy the d optimal c optimal and fiducial method criteria

optimal designs for discrete choice contingent valuation surveys single bound double bound and bivariate models this paper finds the designs for discrete choice contingent valuation surveys which maximize the precision of a statistic of interest about the public s willingness to pay wtp for a change in the environmental quality such as median wtp an optimization problem is set up in which the efficiency of the estimate of median wtp or a related concept is the objective function to optimize with respect to the survey design i e the set of bids offered to the respondents in deriving the optimal designs we consider alternative econometric models such as the basic single bound model that uses the responses to the first payment question the traditional interval data or double bound model for surveys with a follow up payment question and the recently proposed bivariate binary response model simulations are carried out to compare the alternative design principles and assess their performances with respect to the statistic of primary interest median wtp and other welfare measures such as mean wtp other designs that are constructed ad hoc are also examined

starting point bias in dichotomous choice valuation with follow up questioning abstract follow up questions are frequently used to improve the efficiency of dichotomous choice contingent valuation questionnaires however a number of authors e g 12 16 have noted a significant difference between the wtp distributions implied by initial and follow up question responses this paper investigates starting point bias as one explanation for the phenomenon we develop a model of starting point bias in the context of dichotomous choice questioning with follow up using a monte carlo simulation to illustrate the potential bias imparted to wtp estimates an application is provided based on data from a cv study in northcentral iowa

optimal accommodation by strong policymakers under incomplete information abstract this paper examines the optimal behavior of a policymaker who is able to precommit labelled strong when the public entertains the possibility that he is either strong or weak unable to precommit the main result is that in the presence of doubts about their type it is optimal even for strong policymakers to partially accommodate inflationary expectations this contrasts with vickers 1986 who finds that when strength is conceived in terms of the relative concern for employment the strong policymaker inflates less under incomplete than under full information the paper also provides a theory of endogenous announcements

interest rate parity and foreign exchange risk premia in the erm abstract in this paper we evaluate uncovered interest rate parity in the erm by testing market efficiency and zero risk premia in a general asset pricing framework the overidentifying conditions derived from the model are not rejected but we strongly reject risk neutrality nevertheless estimated risk premia between erm currencies are moderate to low therefore due to the diversifiability of foreign exchange risk the standard uip relation between exchange rates and interest rates is a reasonable approximation within the erm

the control of export credit subsidies and its welfare consequences a two stage bertrand duopoly model demonstrates how the sequence of firm and government actions can explain the origins of export credit subsidies and can affect the welfare consequences of international agreements to adopt subsidy rate ceilings firms act first by stating prices in applications for export credit and can induce positive subsidies by inflating the prices the subsidies transfer rents from governments to firms without changing welfare defined as profits less subsidy expenditures governments become the first to act by adopting subsidy rate ceilings that bind ceilings cause firms to lower prices such that if a positive ceiling binds welfare falls

what determines urban households willingness to pay for co2 emission reductions in turkey a contingent valuation survey abstract this paper explores turkish urban households willingness to pay wtp for co2 emission reductions expected to result from improvements in power production a face to face questionnaire with a contingent valuation cv module prepared using the double bounded dichotomous choice elicitation framework was administered to 2422 respondents representative of urban turkey a developing country with low but rapidly increasing greenhouse gas emissions the determinants of wtp were identified by considering not only the impact of standard socio economic factors but also the effects of environmental knowledge attitudes and behaviour the relevance of the identity of the collection agent national versus international institutions in terms of trust people have towards them and the degree of perceived participation of others in the realization of the project our study confirms the existing literature in demonstrating that wtp figures reported by young and educated people that are active on environmental issues and who also possess material security and environmental knowledge are more likely to be high however their willingness to make contributions is hampered significantly by their belief that their fellow citizens will not contribute and the general lack of trust in institutions overall this study may be taken as a call to eliminate governance related uncertainties in climate change deals

stochastic devaluation risk and the empirical fit of target zone models in the model of this paper an exchange rate fluctuates between given boundaries for random lengths of time and jumps discretely when devaluation occur we provide explicit solutions for the stochastic processes followed by the exchange rate and by the expected rate of depreciation when the likelihood and the size of devaluations vary stochastically over time the model produces realistic patterns of covariation between exchange rates and interest rate differentials and provides interesting interpretations of available empirical evidence we also specify how to infer devaluation risk from target zone data

credibility disinflation and gradualism abstract the following conundrum is examined success or failure of a disinflation policy depends largely on expectations of maintained lower money growth this suggests two equilibria a a policy is expected to be maintained and succeeds policy makers are re elected maintaining the policy and validating initial expectations b a policy is not expected to be maintained and fails policy makers are not re elected the policy is not maintained validating initial expectations

procedural invariance testing of the one and one half bound dichotomous choice elicitation method the contingent valuation method for estimating willingness to pay for public goods typically adopts a single referendum question format which is relatively statistically inefficient as an alternative cooper hanemann and signorello 2002 propose the one and one half bound oohb format allowing researchers to question respondents about both a lower and higher limit on project costs thereby securing substantial gains in statistical efficiency using an experimental design we find that responses to oohb valuation questions fail crucial tests of procedural invariance we test various competing models of observed response patterns including strategic misrepresentation of standard preferences and nonstandard models of preference formation

ordering effects in nested top down and bottom up contingent valuation designs abstract within a contingent valuation cv survey ordering effects are defined where responses to a given question vary in a theoretically unanticipated manner according to the positioning of that question relative to others in the survey instrument this paper employs a split sample cv design to investigate the potential for such ordering effects upon stated willingness to pay for nested goods in one top down design values are first elicited for protecting the whole of an endangered area after which values for a part sub area are elicited a second bottom up treatment reverses the order of valuation tasks with the part scheme valued prior to the whole results show that whole and part valuation responses are logically ordered and determined by a consistent set of factors irrespective of question order however variance to question order was observed in both the part and whole valuations the correspondence of these results to standard and non standard preference theories is explored and the difficulties and practical issues concerning valuing nested goods are highlighted

contingent valuation and social choice the contingent valuation method for estimating the existence value of natural resources is examined for psychophysical robustness statistical reliability and economic sensibility extensions of standard models for willingness to pay and suitable econometric techniques for analyzing these models are developed the analysis is applied to a series of experiments on the value of preserving wilderness areas in the western united states the results call into question the reliability of the cv method for estimating existence values

learning design contingent valuation ldcv noaa guidelines preference learning and coherent arbitrariness we extend the contingent valuation cv method to test three differing conceptions of individuals preferences as either i a priori well formed or readily divined and revealed through a single dichotomous choice question as per the noaa cv guidelines k arrow r solow p r portney e e leamer r radner h schuman report of the noaa panel on contingent valuation fed reg 58 1993 4601 4614 ii learned or discovered through a process of repetition and experience j a list does market experience eliminate market anomalies q j econ 2003 41 72 c r plott rational individual behaviour in markets and social choice processes the discovered preference hypothesis in k arrow e colombatto m perleman c schmidt eds rational foundations of economic behaviour macmillan london st martin s new york 1996 pp 225 250 iii internally coherent but strongly influenced by some initial arbitrary anchor d ariely g loewenstein d prelec coherent arbitrariness stable demand curves without stable preferences q j econ 118 1 2003 73 105 findings reject both the first and last of these conceptions in favour of a model in which preferences converge towards standard expectations through a process of repetition and learning in doing so we show that such a learning design cv method overturns the stylised facts of bias and anchoring within the double bound dichotomous choice elicitation format

efficiency gains afforded by improved bid design versus follow up valuation questions in discrete choice cv studies interval data analysis of cv dis crete choice responses delivers efficiency gains which must be weighed against the risk of intro ducing strategic response bias efficiency gains are also achievable by improved bid design we assess these gains on median wtp estimates first in an empirical application then by means of a monte carlo experiment comparing three differ ent bid designs improved but sub optimal bid design delivers comparable gains to those achieved by one and two follow up questions the first follow up captures more than 50 of the efficiency gain provided by a second follow up jel q26

a reconsideration of the uncovered interest parity relationship abstract this paper argues that the uncovered interest parity uip relationship is distinct from and more important than the unbiasedness of forward exchange rates as predictors of future spot rates the standard finding that the slope estimate b is roughly 3 in regressions of s t on t 1 s t 1 implies rejection of unbiasedness but not necessarily uip the hypothesis that monetary authorities manage interest rates so as to smooth their movements while also resisting changes in exchange rates is attractive conceptually and is capable of explaining not only the b 3 finding but also several other notable features of the data

were the peseta exchange rate crises forecastable during target zone period during the 1990s several fixed or quasi fixed exchange rate systems collapsed currency crises have happened in both developed and emerging countries so it is necessary to forecast and avoid them however financial market crises have been extremely difficult to forecast economic agents expectations are nonobservable variables that cannot be ignored in the models in addition if it is required to study the european case during the 1990s the censored disposition of the exchange rate cannot be ignored either a discrete time target zones model is proposed where these aspects are taken into account it will be tested in a peseta deutsche mark exchange rate framework from june 1989 to december 1998 the results indicate differences between before and after the shift in band widths in august 1993

an evaluation of the economic effects of the aid and trade provision this article offers an evaluation of the aid and trade provision from its introduction in 1978 up to 1990 in economic terms it is an export subsidy and we ask if it meets the criteria for a subsidy under strategic trade policy the commercial benefits to specific industries and companies are shown to be quite high especially relative to the initial outlay and atp appears to go to some industries earning monopoly rents and exhibiting scale or external economies so it could form part of a strategic trade policy we argue that even where it is awarded to suitable industries atp is unlikely to confer strategic benefits on the uk largely because of international practice and rent seeking we conclude that atp is unlikely to be of a net economic benefit to the uk or ldcs

bias in discrete response contingent valuation abstract the empirical literature on discrete response contingent valuation has found that seemingly innocuous changes in the statistical models estimated result in significantly different point estimates of willingness to pay this paper hypothesizes and tests several potential explanations for these results first it investigates and compares the biases inherent in single bounded and double bounded maximum likelihood estimation procedures and examines how they react to various bid designs and sample sizes then it examines the presence and identification of outliers in binary choice data and how these outliers influence estimation finally it presents an alternative approach to addressing the issue of outliers which explicitly acknowledges the possibility of upwardly biased response probabilities

how wrong can you be implications of incorrect utility function specification for welfare measurement in choice experiments despite the vital role of the utility function in welfare measurement the implications of working with incorrect utility specifications have been largely neglected in the choice experiments literature this paper addresses the importance of specification with a special emphasis on the effects of mistaken assumptions about the marginal utility of income monte carlo experiments were conducted using different functional forms of utility to generate simulated choices multi nomial logit and mixed logit models were then estimated on these choices under correct and incorrect assumptions about the true underlying utility function estimated willingness to pay measures from these choice modeling results are then compared with the equivalent measures directly calculated from the true utility specifications results show that for the parameter values and functional forms considered a continuous quadratic or a discrete linear attribute specification is a good option regardless of the true effects the attribute has on utility we also find that mistaken assumptions about preferences over costs magnify attribute mis specification effects

estimating benefits for effective enforcement of speed reduction from dichotomous choice cv we present an empirical estimation of the distribution of wtp foreffective speed restriction via implementation of local trafficcalming schemes random samples are drawn from the populations ofhouseholds henceforth hhs of three centres intersected by maintrunk roads with varying through traffic conditions we estimatethe underlying wtp distributions from discrete choice responsesto site specific referendum contingent valuation studiesaccounting for zero bidders we then test the hypothesis ofdifferent distributions across villages the statistical analysisconsists first of a parametric specification and then of atotally non parametric one stated welfare changes for effectivespeed reduction are found to be sizeable and the parameters ofthe random utility models are plausibly related to differences inobjective speed measures across centres the results appear toencourage the use of the referencum cv method in the estimationof local public goods in this case study the proposed publicproject would seem to pass the kaldor hicks potentialcompensation test

statistical approaches to the fat tail problem for dichotomous choice contingent valuation if a cumulative density function esti mated from dichotomous choice data has an unre alistically fat right hand tail mean willingness to pay wtp will be overestimated truncating the range of integration results in a lower bound esti mate of the true mean wtp a normalization pro cedure proposed by boyle welsh and bishop 1988 unnecessarily depresses the estimate further a new statistical approach is presented that allows a best guess estimate of mean wtp because this estimate involves extrapolation beyond the range of the data it tends to be highly variable jel q21

real exchange rate overshooting and the output cost of bringing down inflation implementing a gradualist policy of monetary contraction in an open economy with a freely floating exchange rate but with nominal inertia in domestic labor costs can lead to prompt and substantial changes in the nominal and real exchange rate one of the virtues claimed for such exchange rate overshooting however is its immediate effect on the price level and so on domestic wage and price inflation in this paper we show that in a model which is super neutral and has nominal inertia in both the level of labor costs and their trend or core rate of growth this early overshooting of the exchange rate does not succeed in cutting the output costs of reducing steady state inflation those output and unemployment costs which are initially avoided by over valuing the currency have to be paid later when this overvaluation is corrected relative to other policies which achieve the same effect on steady state inflation exchange rate overshooting brings inflation down more quickly this abstract was borrowed from another version of this item

the foreign exchange risk premium in a target zone with devaluation risk abstract the foreign exchange risk premium in an exchange rate target zone is derived when the exchange rate is heteroskedastic within the band and there is a separate devaluation risk the risk premium is then the sum of two separate risk premia arising from uncertainty about exchange rate movements within the band and from uncertainty about devaluations both real and nominal risk premia are considered real and nominal risk premia from movements within the band are very small real and nominal risk premia from devaluations are larger but still relatively small proportions of the interest rate differential

target zones and forward rates in a model with repeated realignments abstract this paper studies the term structure of forward premia in a target zone with imperfect credibility the relationship between spot and forward exchange rates which reflects the possibility of realignments of the band is studied for various intervention policies with different degrees of credibility forward market data is used to estimate the implied credibility of the french german target zone during the ems parameter estimates accord with the experience of the ff dm exchange rate during the 1980s although spot exchange rates display little sensitivity to anticipated intervention forward data can be used to detect the effects of intervention on exchange rate dynamics

repeated dichotomous choice formats for elicitation of willingness to pay simultaneous estimation and anchoring effect repeated dichotomous choice contingent valuation data are generated from responses to a succession of binary questions regarding alternative prices for an environmental good in this paper we propose a simultaneous equation model that allows for endogeneity and error correlation across the responses at each stage of the bidding process the model allows us to study the evolution of anchoring effects after the second dichotomous choice question estimation involves the bayesian techniques of gibbs sampling and data augmentation and the application focuses on the preservation value of a natural area the results for a data set involving up to four successive dichotomous choice questions show that restricted multiple bounded models are rejected by the data with the general model in addition willingness to pay tends to stabilize after the second stage in the elicitation process for the general unrestricted model when taking anchoring effects into consideration it is revealed that individuals responses in the latter stages are influenced by the sequence of bid prices offered in earlier questions nevertheless they do not have a significant effect on welfare estimates