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- Title
IMPOSING SMOOTHNESS PRIORS IN APPLIED WELFARE ECONOMICS: AN APPLICATION OF THE INFORMATION CONTRACT CURVE TO ENVIRONMENTAL REGULATORY ANALYSIS.
- Authors
Thurman, Walter N.; Fox, Tyler J.; Bingham, Tayler H.
- Abstract
Economic effects of public policy alternatives often are analyzed with simulation models. The value of simulation is enhanced when model parameters can credibly be estimated econometrically. But unrestricted estimation can be expected to result in problematic estimates, for example, estimated parameters contrary in sign to what economic theory dictates. The information contract curve (ICC), developed by Leamer, provides a flexible means to impose regularity on estimated parameters at minimum-likelihood cost. We extend the ICC methodology, using conically uniform priors, and apply it to measuring the welfare costs of environmental regulations in the U.S. pulp, paper, and paperboard industry.
- Subjects
UNITED States; ECONOMIC policy; ECONOMICS; PAPER products industry; ECONOMETRICS; ENVIRONMENTAL law; ELASTICITY (Economics); ENVIRONMENTAL regulations; METHODOLOGY; SIMULATION methods &; models
- Publication
Review of Economics & Statistics, 2001, Vol 83, Issue 3, p511
- ISSN
0034-6535
- Publication type
Article
- DOI
10.1162/00346530152480153