Daigee Shaw

On-site samples' regression: Problems of non-negative integers, truncation, and endogenous stratification☆

Abstract The paper corrects an estimation problem that has not yet been recognized in previous estimates of demand functions using on-site samples. There are three kinds of problems that one faces in on-site samples, namely, non-negative integers, truncation and endogenous stratification. Two theoretically correct maximum likelihood methods are developed based on two different assumptions about the variable distribution: the normal distribution and the Poisson distribution. A simulation is performed to compare the two methods using generated data sets of known models. We should not use OLS and instead should use the maximum likelihood methods developed here to estimate demand functions that use on-site samples. If forecasting is the purpose of estimation, then the simulation indicates that the Poisson ML method may be better.

Climate impacts on aggregate farm value: accounting for adaptation

Abstract This paper explains a Ricardian method which compares actual farmer behavior across different climates. The method incorporates farmers adaptation because it captures the outcome of each farmer matching his behavior to local climate conditions. This paper explores a new application of the Ricardian method capturing how climate effects both the per acre value of farms and how much land is farmed. These empirical relationships are used to predict the agricultural impacts of simple climate warming scenarios.

The Impact of Climate Change on the United States Economy: The impact of climate variation on US agriculture

This chapter explores the effect of climate on the value of US agricultural land using a Ricardian model. The research extends previous analyses by including both interseasonal and diurnal climate variation in addition to average temperature and precipitation variables. With these climate variation variables included, small increases in average temperature are predicted to be beneficial. Increases in interannual climate variation are predicted to be generally harmful to US agriculture but decreases in diurnal variation will be beneficial. For centuries analysts have been interested in the impact of weather on crops in order to predict what crops to grow, when to plant and harvest, and what agricultural prices will be each year. With the growing likelihood that accumulating greenhouse gases will change the climate (IPCC, 1996), there has been growing interest in also measuring the impact of climate change on agriculture. Two distinct ways to measure the impacts of climate on agriculture have emerged in the literature: an agronomic approach and a Ricardian rent approach. The agronomic approach (Chapter 2; Adams et al., 1989, 1990, 1995; Crosson and Katz, 1991; Rosenzweig and Parry, 1994) predicts changes in yield from crop simulation models such as CERES and SOYGRO and then enters these changes in mathematical models of agriculture production and consumption. The Ricardian approach (Johnson and Haigh, 1970; Mendelsohn et al., 1994, 1996) uses an empirical cross-sectional approach and estimates the relationship between land prices and climatic, economic, and soil variables. The agronomic approach, with its extensive reliance on specific crop models, has the advantage of being based directly on carefully controlled scientific experiments so that it can predict phenomena (such as carbon fertilization) that have not yet occurred in nature. The method is also capable of detailed displays of the links between climate, crop yields, and market equilibrium. The approach is popular among scientific analysts of climate impacts because it captures the tremendous detail of individual crop models. The approach, unfortunately, is somewhat mechanistic. The myriad adaptations that farmers might make to climate are difficult to model explicitly and so are often omitted, overestimating the damages from climate warming.

Evaluating GCM output with impact models

This study uses empirical agricultural impact models to compare the U.S. climate change predictions of 16 General Circulation Models (GCMs). The impact analysis provides a policy-relevant index by which to judge complex climate predictions. National aggregate impacts vary widely across the 16 GCMs because of varying regional and seasonal patterns of predicted climate change. Examining the predicted impacts from the full set of GCMs reveals that the seasonal detail in the GCM predictions is so noisy that it is not significantly different from a constant annual change. However, a consistent regional pattern does emerge across the set of models. Nonetheless, aggregating climate change across seasons and regions within the United States, using a national-annual climate change provides a reasonable and efficient approximation to the expected impact predicted by the 16 GCM models.

The resistibility and shiftability of depletable externalities

Abstract In their recently revised book Baumol and Oates (“The Theory of Environmental Policy,” 2nd ed., Cambridge Univ. Press, Cambridge, UK 1988) accept Birds argument on the optimal taxation policy when externalities are shiftable and depletable. Their conclusion is that the standard Pigouvian tax which is placed upon the generator of a negative externality can be extended to tax the victims who shift the externality to others or extended to compensate recipients in order to achieve Pareto optimality. It is shown in this paper that their conclusion is not free from error, because the possibility of resisting a shifted externality and conjectural variations by recipients is not recognized. Whether an externality is shiftable depends not only on the shifting activity of the original victim but also the resisting activity of his neighbors and their conjectures about each others action. As such, the shifters should be taxed and the recipients should be compensated at the same rate per unit of externality shifted if the tax base is the output of the shifting and resisting activities. On the other hand, if the tax base is the input which produced the shifting of the externality, then both the shifters and the recipients should be subject to a tax (or subsidy) per unit of input that they have engaged in. Whether it is a tax or a subsidy depends on the direction and magnitude of the conjectural variation. The model and its policy implication can be generalized to cover the omnipresent and wasteful rent seeking activities.

A probabilistic seismic risk analysis of building losses in Taipei: An application of Haz‐Taiwan with its pre‐processor and post‐processor

Abstract We employ a probabilistic seismic risk analysis to estimate exceedance probability curves, average annual loss (AAL) and probable maximum loss (PML) of building stocks in Taipei. It utilizes an event‐driven loss estimation model, HAZ‐Taiwan, and develops its pre‐processing and post‐processing software modules. The pre‐processing module establishes a set of hazard‐consistent scenario earthquakes. The HAZ‐Taiwan model estimates hazards, vulnerabilities and economic losses for each scenario earthquake. The aggregate and occurrence exceedance probability curves for building losses and their confidence intervals are simulated using the Monte Carlo simulation in the postprocessing module. It is found that the exceedance probability of an aggregate loss of USD 1.22 billion is 0.001. This amount of loss is approximately 2.78% of the total building stocks in Taipei. Its 5%‐95% confidence intervals range from USD 1.13–1.31 billion. The average annual loss of buildings in Taipei is currently USD 32 million, or approximately 0.07% of the total building stocks.

Alternative approach to combining revealed and stated preference data: evaluating water quality of a river system in Taipei

This paper combines data from a double-bounded referendum contingent valuation survey and a travel cost survey. Rather than linking the two data sets through a common utility function, as in Cameron (1992) and Niklitschek and Leon (1996), we link them through the expenditure difference function. By using the expenditure difference approach, the parameters and their standard errors for individual preferences can be easily extracted, and the trip demand function and exact welfare measure of quality improvements can be estimated. This approach is illustrated in a case study that evaluates the benefits resulting from water quality improvements in the Tamshui river system in the Taipei Metropolitan Area of Taiwan. The empirical estimation results show that the use value becomes much larger when the water quality improves to a higher level. In addition, the nonuse value makes up a large share of the total value of improving water quality; thus the nonuse value could be crucial for examining projects aimed at improving the water quality of the four rivers in the Tamshui river system.

Valuing Environmental Resources through Demand for Related Commodities

We examine the revealed preference theory underlying the welfare analysis of public goods (e.g., environmental quality) by observing the consumption of related commodities. Inspired by Larson (1991) and Ebert (1998), and extended from Eom and Larson (2006), an empirical strategy is formulated, consistent with the theory of uniquely deriving use and nonuse values for a change in the public good. We show that the weak complementarity assumption and the Willig condition, the common preference assumptions used to support the revealed preference methods for non-market valuation, may be tested as parameter restrictions. A study of water quality valuation is presented to illustrate the proposed empirical strategy. Results show that the weak complementarity assumption and the Willig condition generally do not hold in the case study, and the consumer surplus derived from the indirect valuation method deviates largely from the exact welfare measures.

Evolution and evaluation of air pollution control policy in Taiwan

Over the last 5 years the air quality in Taiwan’s cities has gradually improved. Part of the credit for the improvement has been given to the air emission fee program that was first implemented in 1995. Before then, the traditional command-and-control program and tax-allowance subsidy were the two major instruments used for air pollution control. The Air Pollution Control Act was revised in early 1999. Among its many new features, the most important one was a new control program, the cap-and-trade program. Moving from a fee to a cap-and-trade program has been a unique Taiwan experience. The purpose of this article is to compare the four existing programs (i.e., command-and-control, tax-allowance subsidy, emission fee, cap-and-trade) in terms of both economic and public choice theories.

The Impact of the Economic Crisis on East Asia

Written by a distinguished group of Asian social scientists, this study summarizes and synthesizes the economic impacts of the crisis on individual countries and their policy response since 2008, and in particular carefully scrutinizes the immediate and remote causes of the crisis. It not only offers an assessment of its impacts, and identifies specific country measures that can be undertaken to stabilize the situation, but also looks at the crisis from three important economic perspectives: that of a healthy fiscal system, international trade, and the energy market.