Measurement error and functional form: implications for welfare estimates

Stoeckl, Natalie (2003) Measurement error and functional form: implications for welfare estimates. Applied Economics Letters, 10 (5). pp. 259-270.

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Abstract

This paper describes a series of Monte Carlo simulations which investigate the accuracy of final estimates generated from the travel cost model (TCM). The results are of interest to all applied researchers who: (a) cannot select functional form on theoretical grounds; and (b) wish to use Ordinary Least Squares (OLS) estimates for further calculations. This is because the simulations indicate that certain types of measurement error decrease the probability that researchers will be able to determine the correct functional form of the estimating equation on the basis of goodness of fit statistics. While this does not necessarily mean that slope (partial coefficient) estimates will be biased, it can cause substantial and unpredictable bias in welfare estimates.

Item ID: 8980
Item Type: Article (Refereed Research - C1)
ISSN: 1466-4291
Date Deposited: 11 Mar 2010 01:06
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140219 Welfare Economics @ 60%
14 ECONOMICS > 1402 Applied Economics > 140216 Tourism Economics @ 40%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9102 Microeconomics > 910209 Preference, Behaviour and Welfare @ 100%
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