handling unobserved site characteristics in random utility models of recreation demand abstract this paper presents a new random utility model of recreation demand that addresses the unobserved characteristics of recreation sites most random utility recreation demand models implicitly assume that all relevant site characteristics are observed by the researcher or allow for the possibility of unobserved characteristics in a restrictive manner unlike traditional approaches the proposed model avoids the bias unobserved site characteristics can cause in welfare estimates and the travel cost parameter monte carlo simulations motivate the proposed model by showing that it provides more efficient parameter estimates in contrast existing methods yield less efficient estimates and biased standard errors that overstate precision an empirical application to recreational fishing in wisconsin illustrates the potential importance of this modeling innovation in this application controlling for unobserved characteristics is important for a range of model specifications

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

the political economy of regulations and trade wine trade 1860 1970 dramatic changes in the 1860 1970 wine trade provide insights on the political economy of regulations and policy instrument choice and trade an invasion of phylloxera in the 1870s turned france from the world s leading exporter to a massive importer of wine and grapes when french production recovered a combination of tariffs safety regulations and quality standards were introduced to protect its french producers causing dramatic changes in global wine and grape production and trade including in spain italy turkey greece algeria tunisia and morocco changes in wine regulations were caused by relative income and loss aversion factors in political economy tariffs were the preferred policy instruments as they directly restrict imports bring in revenues have low transaction costs and are preferred political instruments when there are information imperfections safety regulations and quality standards including labelling and input prohibitions reduce asymmetric information for consumers or undesirable externalities and simultaneously protected domestic producers regulations were often targeted at imported products wine and raisins when tariffs were ineffective or constrained by institutions such as on colonial wine hence tariffs and quality regulations were jointly used in wine policy both as complements and as substitutes in policy design

site aggregation in a random utility model of recreation random utility models are commonly used to model the choice among a set of alternatives often due to data or computational constraints the analyst must use aggregated alternatives to estimate the model these aggregates are defined by averaging characteristics of alternatives over prespecified groups in this analysis we demonstrate that unless some very restrictive conditions hold the use of aggregated alternatives will lead to biased results then using a data set of recreational fishing in wisconsin we show the effects that this bias can have on the results estimated from the model

does centralization increase the size of government abstract are fiscal programs larger or smaller if they are run centrally rather than locally in a prospective federation we abstract completely from well understood economic issues and focus instead on the political effects of centralization for fiscal programs with benefits broadly spread in the population such as redistributive transfer schemes social insurance and general government consumption centralization changes the coalition of voters who favor a large program in a direction that depends on the nature of the redistributive instrument for fiscal programs with localized benefits such as provision of local public goods centralization creates opportunities for rent seeking which increases the size of government

a transaction cost analysis of the land development process the production of our built environment involves many transaction costs we want to avoid unnecessary transaction costs nevertheless we hardly take account of transaction costs when considering different ways of organising the development process the most important reason is probably the difficulty in identifying them this paper shows why transaction costs are important and offers a method for identifying them with this method it is possible to compare the efficiency of different institutional arrangements

a structural equations approach to modeling consumptive recreation demand abstract in this analysis we develop a two equation structural model of a count travel cost model of recreational angling demand and angling success by modeling the two equations jointly we avoid the difficulties associated with the usual approach which estimates the demand for recreational fishing sites assuming the existence of an exogenous measure of fishing quality our analysis explicitly develops the joint log likelihood function that combines the two processes we estimate our model using full information maximum likelihood methods

the power of the purse and its implications for bureaucratic policy making a dilemma of the power of the purse is thatcutting an agency s budget may make a desired policyinfeasible i examine the implications of thisdilemma with a repeated game in which a bureau choosesunobservable policies after a legislature sets itsbudget the bureau is work averse and has its ownpolicy preferences and therefore may cheat but thelegislature may perform an audit to recover slack funds a main result is that if the legislaturedesires a higher policy level than the agency then itfaces a trade off between good but wasteful policiesand bad but efficient ones

an analysis of the housing redevelopment process in korea through the lens of the transaction cost framework this paper applies the transaction cost framework to the analysis of the housing redevelopment process in korea the housing redevelopment process involves various identifiable transactions and cos

two stage estimation to control for unobservables in a recreation demand model with unvisited sites the role of unobserved site attributes is a growing concern in recreation demand modeling one solution in random utility models rums involves separating estimation into two stages where the rum is estimated with alternative specific constants ascs in the first stage and the estimated ascs are regressed on the observed site attributes in the second stage prior work estimates the second stage with ordinary least squares ols and two stage least squares regression we present an application with censored regression in the second stage we show ols produces inconsistent parameters when there are unvisited sites with no estimable ascs and that censored regression avoids this problem

budgetary policy with unified and decentralized appropriations authority the divestiture of the house appropriations committee in the1880 s has received considerable attention of an empiricalnature this paper presents a formal model of legislativedecisionmaking using a common agency formulation to representinterest group lobbying of legislators this framework is usedto analyze the effects of decentralizing appropriationsauthority the conditions under which decentralization leadsto higher spending are characterized it is argued that theconventional view that divestiture caused higher levels ofspending only holds if decentralization created barriers tolobbying and political bargaining across different committees in addition the role of specialized committee knowledge isexamined

the welfare economics of cooperative and noncooperative fiscal policy abstract in the absence of ricardian equivalence lump sum transfers between households within a country can alter the pattern of national saving and consumption allowing the government to exploit the country s size in world trade and in international borrowing and lending redistribution across generations through unfunded social security retirement schemes or public sector deficit finance with lump sum taxes and transfers enables a national planner to affect both the static and intertemporal terms of trade when trade restrictions or discriminatory taxation of asset income are unavailable due to international agreements the case for cooperative fiscal policy formation by governments of interdependent economies is examined in an overlapping generations economy with internationally perfectly mobile capital and a single relative price the world interest rate the optimum unfunded social security scheme when no distortionary tax instruments are allowed is derived for a government with nationalistic social preferences this policy targets both intergenerational distribution objectives and interest rate objectives the absence of distortionary taxes implies that no overall loss in world surplus need result from the strategic use of lump sum transfers so that coordination of intergenerational transfers is unnecessary for pareto optimality when internationally enjoyed public goods are introduced allocational efficiency requires cooperative selection of national exhaustive public spending programs but it does not demand that the financing of public expenditures be coordinated

understanding how land is exchanged co ordination mechanisms and transaction costs this paper seeks to increase our understanding of how land is exchanged between suppliers and demanders most current land price theories and the land use models which are derived from them assume that co ordination between suppliers and demanders is achieved through the price mechanism there are however other possible co ordination mechanisms including imposed rules and mutual trust in order to take account of these the effect of institutions has to be included in the theories transaction cost economics as one strand of institutional economics seeks to explain which co ordination mechanism is chosen in practice in this paper the application of these ideas is illustrated with findings from a detailed survey of how dutch housing associations acquire land it appears that these housing associations choose to acquire land through the mechanism of mutual trust when there is a network in place which they can use and to acquire through the market when that mechanism is not available this applicat

the effect of nesting structure specification on welfare estimation in a random utility model of recreation demand an application to the demand for recreational fishing nested logit has become common in estimating random utility models of recreation demand because welfare analysis is often the objective of estimating these models it seems natural to ask what effect does the choice of nesting structure have on the welfare estimates generated by these models therefore we compare the results of nine nesting structures andfindthat the variation in welfare estimates across the models is not large our results are contrary to those of kling and thomson and shaw and ozog the difference appears to originate with differences in the estimated dissimilarity coefficients in the nested models

calibrating benefit function transfer to assess the conservation reserve program benefit transfer offers an inexpensive alternative to conducting an original study to determine economic value unfortunately benefit transfers can also result in biased welfare estimates in this paper we suggest a method of calibrating the benefit transfer to reduce this bias an empirical example to determine the benefits of the conservation reserve program on water based recreation illustrates the potentially large biases that can result if the transfer is not calibrated

when ideas trump interests preferences world views and policy innovations the contemporary approach to political economy is built around vested interests elites lobbies and rent seeking groups which get their way at the expense of the general public the role of ideas in shaping those interests is typically ignored or downplayed yet each of the three components of the standard optimization problem in political economy preferences constraints and choice variables rely on an implicit set of ideas once the manner in which ideas enter these frameworks is made explicit a much richer and more convincing set of results can be obtained in particular new ideas about policy or policy entrepreneurship can exert an independent effect on equilibrium outcomes even in the absence of changes in the configuration of political power

optimal central banker contracts and common agency this paper considers the contracting approach to centralbanking in a simple common agency model we suggest thatcentral banker contracts that do not consider the possibilityof more than one principal existing are incomplete contracts such incomplete contracts can be a poor form ofmonetary policy delegation under common agency we develop amodel with two principals society government and ageneric interest group whose objective conflicts withsociety s ex ante preferences by incorporating an inflationarybias we determine when the government offered orinterest group offered contract dominates the central banker sdecision the results largely depend on whether theinterest group offered contract is written in terms of outputor inflation

estimation and welfare calculations in a generalized corner solution model with an application to recreation demand the kuhn tucker model of wales and woodland 1983 provides a utility theoretic framework for estimating preferences over commodities for which individuals choose not to consume one or more of the goods due to the complexity of the model however there have been few applications in the literature and little attention has been paid to the problems of welfare analysis within the kuhn tucker framework this paper provides an application of the model to the problem of recreation demand in addition we develop and apply a methodology for estimating compensating variation relying on monte carlo integration to derive expected welfare changes

the political economy of inflation labour market distortions and central bank independence using the citizen candidate model we study the government s choice of institutions for the labour market and the central bank and derive the implications for inflation and employment we derive conditions for the existence of equilibria in which the labour market is distorted and the central bank is dependent or independent under a range of conditions affecting central bank dependence the post election cycle in inflation and employment and inflation bias our results imply that average inflation and inflation variability are lower under an independent central bank whereas employment variability can be lower or higher consistent with evidence for oecd countries many democratic societies delegate key tasks to non elected and independent institutions a prominent example being independent central banks the belief in the advantage of central bank independence is nursed by the cross country evi

the economics of fish consumption advisories insights from revealed and stated preference data measuring how fish consumption advisories affect angler s utility has proven difficult relying on stated preference sp data is problematic because of hypothetical bias revealed preference rp data benefits from using actual behavior however co linearity often makes it difficult to model the array of advisory severity levels across different species and catch rates the array of advisories also makes traditional joint estimation impractical this paper describes an alternative joint estimation technique based on an index of sp parameter that we used for estimating the effect of fish consumption advisories on the fox river green bay

anticipated vs actual synergy in merger partner selection and post merger innovation past research has primarily focused on what happens after a merger this research attempts to determine whether anticipated benefits from the merger actually accrue we characterize the effects of observed variables on whether pairs of firms merge vis a vis roommate matching and then link these factors to post merger innovation i e number of patents we jointly estimate the two models using markov chain monte carlo methods with a unique panel data set of 1 979 mergers between 4 444 firms across industries and countries from 1992 to 2008 we find that similarity in national culture and technical knowledge has a positive effect on partner selection and post merger innovation anticipated synergy from subindustry similarity however is not realized in post merger innovation furthermore some key synergy sources are unanticipated when selecting a merger partner for example financial synergy from higher total assets and complementarity in total assets and debt leverage as well as knowledge synergy fr

estimating recreation preferences using hedonic travel cost and random utility models over the last decade several authors have questioned the validity of the hedonic travel cost model arguing instead that the random utility model is a superior method for valuing recrea tional site attributes this paper demonstrates that the two methods emanate from a similar utility theoretic framework yet in practice these methods differ in the assumptions made in their appli cation constraining the underlying utility functions to be consistent both models are applied to the valuation of recreational site attributes in the southeastern united states the way in which each method estimates preferences for site attributes is shown to depend critically on the method and the functional form of the underlying utility function micro economic theory began as an attempt to describe predict and value the demand and supply of consumption goods quality was largely ignored in initial theoretical treatises goods were assumed to be homogeneous over the last two decades however economists have started to address quality within the theory of demand environmental economists have extended the theory further to value the quality of recreational sites an important component of land management two distinct approaches for incorporating quality into recreational analyses have emerged the hedonic travel cost method htc and the discrete choice random utility methods rum the hedonic method views site attributes as though they were individual goods which are bundled together in a single purchase the random utility model treats quality as an index which is estimated by examining a discrete choice of alternative sites facing a consumer because the mathematical derivations for the hedonic rosen 1974 and random utility models mcfadden 1978 are quite different many practitioners do not recognize that both models are based on a common utility theoretic foundation in the first section of this paper we show how the hedonic and random utility methods are consistent with the same utility framework

sea bass angling in ireland a structural equation model of catch and effort abstract the relationship between angling effort and catch is well recognised in particular that effort influences catch rates but increased catch which can be considered an attribute of fishery quality may influence effort in terms of number of fishing trips this suggests bi directional feedback between catch and effort in many travel cost applications little attention has been given to this endogeneity problem in this paper we expand the application of structural equation models to address this issue by jointly estimating demand effort and catch functions using a cross section dataset of sea bass anglers we propose two separate joint models first we include expected catch as an explanatory variable in the demand equation in the second we reverse the causality and use the expected number of fishing days as a covariate in the catch function the two approaches produce similar model estimates and perform better at predicting anglers catch and effort than standard models the findings confirm that sea bass angling is highly valued with a consumer surplus of about 282 318 per angler per day though this is likely to be biased upwards furthermore higher catches result in more days fished on average in a 2 1 ratio whereas on average an additional fishing day results in 3 4 additional bass caught

meso economic filters along the policy chain understanding the links between policy reforms and rural poverty in latin america abstract the paper clarifies the meso economy concept by defining it as comprising both the market mechanisms and administrative procedures through which policy decisions and market signals trickle down to the household level three main bodies of literature are reviewed the policy oriented literature in which the meso economy was initially considered the transaction cost approach analyzing market and policy failures and the micro economy level of agricultural household models the paper develops a synthesis of macro meso and micro economic perspectives which focuses on the roles played by three levels of filters intervening along the policy chain implications for policy and research are drawn

local government consolidations the impact of political transaction costs local government in norway comprises a large number of small municipalities cost efficiency can be improved by consolidating local authorities and central government has designed a framework to stimulate voluntary mergers existing theories suggest that political transaction costs will impede consolidations 1 generous grants compensate diseconomies of scale central government has promised small municipalities that grant levels will be maintained but policy promises may not be credible 2 property rights to local revenues are nullified when consolidations have been implemented high revenue municipalities will therefore go against merger with a poorer neighbor 3 a consolidated local council may be composed of different political parties and it may therefore pursue other policies than an existing council expected changes in party strength can lead municipalities to oppose a proposed consolidation 4 senior politicians are less likely to support mergers particularly if they come from small polities

common agency contracting and the emergence of dqopen science dq institutions the cold war s ending has brought mounting pressures to recognize national science and technology research systems yet by comparison with what has been learned already concerning institutional arrangements and business strategies affecting corporate rd investments surprisingly little is known about the economic origins and effects of the corresponding institutional infrastructures shaping the world of academic science and the organization and conduct of publicly supported rd more generally the desirability of closing this particular lacuna in the economics and economic history literatures has been just as evident to economists concerned with extending the analysis of modern institutions as to those who have begun to approach the whole area of science and technology studies from the perspectives and methods of industrial organization economics 1 even before the new economics of science had begun to direct attention to such a program douglass north 1990 p 75 saw a significant challenge and a promising opportunity in explicit exploration of the connecting links between institutional structures and incentives to acquire pure knowledge the research reported here has accepted that challenge see also the other papers in this session timothy lenoir 1998 christophe lecuyer 1998 and marjory s blumenthal 1998 it is focused upon key episodes in the institutional evolution of public science and its complex and changing relationship to the other organizational spheres of contemporaneous scientific activity those in which research was conducted under proprietary rules for industrial profit goals and defense related science and engineering knowledge was sought under conditions of restricted access to information concerning methods findings and their actual and potential applications

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

model selection and misspecification in discrete choice welfare analysis this study extends the work by herriges and kling 1997 to further evaluate the impact of discrete choice modelling techniques on welfare measures particularly we evaluate the performance of the increasingly popular mixed logit model and the computational strategy for deriving discrete choice welfare measures our simulation results show that model misspecification can have profound effects on welfare measures in general the flexible mixed logit model performs relatively well in the presence of misspecification however when the nesting structure can be appropriately identified via statistical tests and a priori knowledge experience the nested logit model provides more reliable welfare measures than the mixed logit model

incentive contracts and elections for politicians with multi task problems abstract we consider a model with a politician facing a multi task problem while in office the reelection mechanism distorts the allocation of effort in favor of tasks whose outcomes can be measured more precisely than others we show that a combination of elections and incentive contracts can alleviate this inefficiency the incentive contract does not require direct information about the performance of the politician and is self financing across terms

the theory of the firm as governance structure from choice to contract the propositions that organization matters and that it is susceptible to analysis were long greeted by skepticism by economists one reason why this message took a long time to register is that it is much easier to say that organization matters than it is to show how and why the prevalence of the science of choice approach to economics has also been an obstacle as developed herein the lessons of organization theory for economics are both different and more consequential when examined through the lens of contract this paper examines economic organization from a science of contract perspective with special emphasis on the theory of the firm

recreation demand models with taste differences over people we estimate random parameter logit models of anglers choice of fishing site the models generalize logit by allowing coefficients to vary randomly over anglers rather than being fixed the models do not exhibit the restrictive independence from irrelevant alternatives property of logit and can represent any substitution pattern estimation explicitly accounts for the fact that the variation in coefficients over anglers induces correlation in unobserved utility over trips by the same angler willingness to pay for improved fish stock and the value to anglers of specific sites are calculated from the models and compared with the estimates obtained from a standard logit model

the making of economic policy a transaction cost politics perspective economic policymaking as a political process the normative approach to policy analysis the positive view of political economy a synthesis the policy process in real time a theme transaction costs the transaction cost politics framework political outcomes and economic efficiency transaction cost analysis in politics mechanisms to cope with transaction costs in politics national differences two case studies to illustrate transaction cost politics tax and expenditure reform in the united states the gatt and national trade politics some reflections and suggestions some lessons for the policy process the role of the economist concluding comments appendix multiprincipal multitask agencies

incentives choice and accountability in the provision of public services this paper discusses a theoretical framework to study the issues of competition and incentives without relying on the standard profitoriented market model in the context of the debates about public service reform in the u k it uses the idea that the production of public services coheres around a mission and discusses how decentralized service provision can raise productivity by matching motivated workers to their preferred missions our focus on competition and incentives cuts across traditional debates about public versus private ownership and allows for the possibility of involving private non profits we also address concerns about the consequences of allowing more flexibility in mission design and competition on inequality

modeling overnight recreation trip choice application of a repeated nested multinomial logit model in this paper we apply the repeated nested multinomial logit model a version of a random utility model rum to estimate the choice of an overnight versus single day recreation trip along with the other usual choice of which of the sites to visit and less typically the choice of whether to participate in our application to fish at all we also find statistically significant income effects in the empirical results the application is to atlantic salmon fishing and the data set is for maine resident angler s fishing trips to rivers in maine and canada

a comparison of contingent valuation method and random utility model estimates of the value of avoiding reductions in king mackerel bag limits this paper estimates the value of king mackerel bag limit changes with both stated and revealed preference methods the 1997 marine recreational fishery statistical survey allows estimation of the value of avoiding bag limit reductions with the random utility model and the contingent valuation method using the contingent valuation method the willingness to pay to avoid a one fish reduction in the bag limit is 2 45 per year using the random utility model the willingness to pay to avoid a one fish reduction in the bag limit is 2 24 per trip and 7 71 for a two month time period considering several methodological issues the difference in willingness to pay between the stated and revealed preference methods is in the expected direction

modeling opec behavior theories of risk aversion for oil producer decisions abstract theories of opec such as price leadership cartel or game theoretic models suggest an incentive for opec members to expand their production capacity well above current levels in order to maximize revenues yet individual opec members consistently explore for and develop oil fields at a level well below their potential the cause of low oil exploration and development efforts among opec members and even some non opec members may have to do with risk aversion this paper describes an alternative theory for opec behavior based on risk aversion using a two piece non neumann morgenstern utility function similar to fishburn and kochenberger 1979 decision science 10 503 518 and friedman and savage 1948 journal of political economy 56 the model shows possible low oil production behavior