Raymond J. Kopp

Contingent Valuation and Lost Passive Use: Damages from the Exxon Valdez Oil Spill

We report on the results of a large-scale contingent valuation (CV) study conducted after the Exxon Valdez oil spill to assess the harm caused by it. Among the issues considered are the design features of the CV survey, its administration to a national sample of U.S. households, estimation of household willingness to pay to prevent another Exxon Valdez type oil spill, and issues related to reliability and validity of the estimates obtained. Events influenced by the studys release are also briefly discussed.

Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis

The use of cost-benefit analysis by federal regulatory agencies has expanded greatly in scope and sophistication. Unfortunately, agencies continue to employ private cost rather than social cost to evaluate environmental quality regulations. Furthermore, general equilibrium impacts and intertemporal effects of regulations are typically not included in the evaluation. In this paper we estimate the social cost of environmental quality regulations mandated by the Clean Air and Clean Water acts. We construct an econometric general equilibrium model of the United States to demonstrate that social cost estimates diverge sharply from private cost estimates. We also demonstrate that general equilibrium impacts are significant and pervasive and that intertemporal effects of the regulations, heretofore ignored, are significant.

The Impact of "No Opinion" Response Options on Data Quality: Non-Attitude Reduction or an Invitation to Satisfice?

According to many seasoned survey researchers, offering a no-opinion option should reduce the pressure to give substantive re- sponses felt by respondents who have no true opinions. By contrast, the survey satisficing perspective suggests that no-opinion options may dis- courage some respondents from doing the cognitive work necessary to report the true opinions they do have. We address these arguments using data from nine experiments carried out in three household surveys. Attraction to no-opinion options was found to be greatest among re- spondents lowest in cognitive skills (as measured by educational at- tainment), among respondents answering secretly instead of orally, for questions asked later in a survey, and among respondents who devoted little effort to the reporting process. The quality of attitude reports ob- tained (as measured by over-time consistency and responsiveness to a question manipulation) was not compromised by the omission of no- opinion options. These results suggest that inclusion of no-opinion op- tions in attitude measures may not enhance data quality and instead may preclude measurement of some meaningful opinions.

The decomposition of frontier cost function deviations into measures of technical and allocative efficiency

Abstract This paper presents a method for decomposing the deviations from a full frontier cost function into Farrell (1957) measures of technical and allocative efficiency. The method draws heavily on duality theory and requires no direct knowledge of the primal production frontier specification or its parameters. Thus, the method is applicable to a broad class of cost functions, including flexible functions such as the translog, which do not possess analytically derivable underlying production functions. The method easily generalizes to joint output production technologies where the decomposition of deviations from frontier profit functions would provide measures of technical, allocative, output mix and scale efficiency.

The Measurement of Productive Efficiency: A Reconsideration

The purpose of this paper is to generalize the Farrell indexes of productive efficiency to nonhomothetic production technologies, and at the same time maintain the cost interpretation of the Farrell measures. Since the generalized indexes rely heavily on recent developments in the estimation of frontier cost and production functions, several frontier models are reviewed. In addition to generalized indexes of technical, allocative, and overall productive efficiency, a variety of single-factor efficiency measures are discussed. The applicability of the proposed efficiency measures is illustrated with a numerical example of electric power generation.

The Spatial Limits of the Travel Cost Recreational Demand Model

This article describes a method for judging the spatial limits of travel cost recreational demand models as they are conventionally applied to secondary data sets. The spatial limits to the travel cost model result from the assumptions necessary to use the available secondary data to estimate the representative individuals demand for a given recreational sites services. The most important of these assumptions involves: (a) the objective of the trip to the recreational site; (b) the amount of time spent on the site during each trip; and (c) the mode of travel and corresponding travel costs required to reach the site. The test proposed for defining the limits is designed for use in time series applications, but can readily be adapted to conform to the cross-sectional framework of travel cost applications. An example of the test if presented, along with a discussion of the potential impact for consumer surplus estimates of such spatial limitations to the model. The case study is of recent topical interest-the Ventana Wilderness Area in Northern California which was destroyed in the fire fighting effort surrounding the Marble Cone Fire in August 1977. This case study suggests that the definition of spatial limits for the travel cost model can impact, rather substantially, the consumer surplus estimates derived from the model. This finding may be especially important to the current policy making process for allocating recreational resources.

A Proposal for Credible Early Action in US Climate Policy

As international negotiations on climate change continue, momentum is building for domestic “early action” to begin reducing US emissions of greenhouse gases in the nearer term. With unopposed Senate ratification of the Framework Convention on Climate Change (FCCC) in 1992, the US and other Parties are already committed to adopt policies and measures to limit these emissions.

Moment-based estimation and testing of stochastic frontier models

Abstract This paper assesses the implications of relaxing some of the distributional assumptions that characterize most composed error formulations of frontier cost and production function models appearing in the literature. Generalized method of moments (GMM) estimation procedures are presented that enable various degrees of distributional flexibility that are typically difficult to attain in likelihood-based approaches to estimation of frontier models. Moment-based specification tests that are specially suited for frontier models are also described. Some properties of the estimators and tests are illustrated via cost functions estimated using three microdata samples of electric utility behavior.

Calculating the Costs of Environmental Regulation

Decisions concerning environmental protection hinge on estimates of economic burden. Over the past 30 years, economists have developed and applied various tools to measure this burden. In this chapter, we present a taxonomy of costs along with methods for measuring those costs. At the broadest level, we distinguish between partial and general equilibrium costs. Partial equilibrium costs represent the burden directly borne by the regulated entity (firms, households, government), including both pecuniary and nonpecuniary expenses, when prices are held constant. General equilibrium costs reflect the net burden once all good and factor markets have equilibrated. In addition to partial equilibrium costs, these general equilibrium costs include welfare losses or gains in markets with preexisting distortions, welfare losses or gains from rebalancing the governments budget constraint, and welfare gains from the added flexibility of meeting pollution constraints through reductions in the use of higher-priced, pollution-intensive products. In addition to both partial and general equilibrium costs, we also consider the distribution of costs across households, countries, sectors, subnational regions, and generations. Despite improvements in our understanding of cost measurement, we find considerable opportunity for further work and, especially, better application of existing methods.

Testing for separable functional structure using temporary equilibrium models

Abstract The importance that functional structure plays in the analysis of producer behavior is well known and responsible for the empirical tests of input separability hypotheses found in the contemporary literature. Unfortunately, to our knowledge all such tests have been conducted under the maintained assumption of full factor input equilibrium. In this paper we propose and implement a method for testing functional structure hypotheses when the behavioral units are permitted to be in disequilibrium. The results of this more general test provide less support for the existence of input separability in two-digit manufacturing than previously reported by the authors using tests assuming full equilibrium.