Robert Halvorsen

Choice of functional form for hedonic price equations

Abstract The appropriate functional form for a hedonic price equation cannot in general be specified on theoretical grounds. In this paper, a statistical procedure for the choice of functional form is proposed. A highly general functional form is specified that yields all other functional forms of interest as special cases. Likelihood ratio tests are used to test the appropriateness of alternative forms. The procedure is illustrated using cross section microdata for housing. For the case considered, the functional forms most commonly used in previous studies are strongly rejected.

The relative efficiency of public and private firms in a regulated environment: The case of U.S. electric utilities

Abstract The relative efficiency of privately-owned and publicly-owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation. The estimation results indicate that the two types of firms are equally cost inefficient in the United States. The average effect of inefficiency is to increase the cost of production by 2.4 percent. Holding output constant, inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel.

A Test of Relative and Absolute Price Efficiency in Regulated Utilities

A model for testing all types of relative price inefficiency expands the Averch-Johnson effect and makes it possible to test for absolute price efficiency, which exists if the value of the marginal product for each factor is equated to factor price and implies both cost minimization and production of the optimal quantity of output. Duality theory is used to derive the empirical model using 1973 data for electric utilities. The results indicate that relative and absolute price efficiency were generally not achieved by electric utilities in that year. 36 references, 1 table.

A Test of the Theory of Exhaustible Resources

An empirical test of the theory of exhaustible resources requires an estimate of the time path of the shadow price of the unextracted resource that generally is not observable because of the prevalence of vertical integration in natural resource industries. In this paper we use duality theory to derive an econometric model that provides a statistical test of the theory of exhaustible resources. A restricted cost function is used to obtain estimates of the shadow prices of unextracted resources. The procedure is illustrated with data for the Canadian metal mining industry. For this industry the empirical implications of the theory of exhaustible resources are strongly rejected.

Interfuel Substitution in Steam Electric Power Generation

A translog normalized restricted profit function is used to study the characteristics of the production function for electric energy. The results indicate that fuel choice in existing steam electric plants responds to changes in fuel prices. The production function is also tested for separability of fuels from capital and labor, homotheticity, returns to scale, and embodied technical change.

The Valuation of Risks to Life: Evidence from the Market for Automobiles

Using hedonic regression techniques, estimates of the willingness-to-pay for changes in the risks of dying can be inferred from actual behavior in market situations involving risk-dollar tradeoffs. Thaler and Rosen (1975) pioneered this approach, obtaining estimates of the value of a statistical life using labor market data, in this paper we use the hedonic technique to obtain the first estimates of the value of a statistical life from data on the market for automobiles. Our estimated value of a statistical life for the sample as a whole is

On Measuring Natural Resource Scarcity

3.357 million 1986 dollars. Copyright 1990 by MIT Press.

A New Hedonic Technique for Estimating Attribute Demand: An Application to the Demand for Automobile Fuel Efficiency

Conclusions concerning trends in natural resource scarcity may depend critically on the choice of scarcity index. Unfortunately, the prevalence of vertical integration in natural resource industries has hindered the use of some otherwise desirable scarcity measures. In this paper duality theory is used to derive an econometric procedure for estimating one such measure, the shadow price of the resource in situ. Empirical results for the Canadian metal mining industry indicate that resource scarcity as measured by this shadow price has decreased substantially over time.

Substitution Possibilities for Unpriced Natural Resources: Restricted Cost Functions for the Canadian Metal Mining Industry

A new hedonic procedure is applied to estimate the effects of gasoline price on the demand for automobile attributes and fuel efficiency. Direct application of a comparative statics analysis circumvents the problems of identification and severe multicollinearity affecting previous hedonic studies. The results indicate that the effect of induced changes in automobile attributes in response to increases in the price of gasoline is to substantially increase fuel efficiency. The estimated elasticities of fuel efficiency with respect to the price of gasoline imply that the long-run own-price elasticity of demand for gasoline is greater than unity. 31 references.

Estimation of Market Power in a Nonrenewable Resource Industry

A bstract -The effects of resource depletion on economic growth depend critically on the elasticities of substitution between non-renewable natural resources and reproducible inputs. Estimation of the elasticities of substitution for natural resources has been hindered by the absence of data on their prices, which results from the prevalence of vertical integration in natural resource industries. In this paper we use the theory of restricted cost functions to develop a general procedure for estimating substitution possibilities for unpriced inputs. Estimation of the model with data for the Canadian metal mining industry indicates that the elasticities of substitution for the natural resource, metallic ore, are equal to unity.