Temporal Stability of Revealed Preference Methods

• Agricultural Economics Workshop
• Departmental Seminar

Date and Location

Thursday, May 25, 2017, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Over two decades ago, the NOAA Blue Ribbon panel suggested that stated preference methods should undergo rigorous tests of their capability to produce temporally stable welfare estimates. Since that time, a rich literature has emerged on the temporal reliability of stated preference methods. However, similar tests of the reliability of revealed preference methodologies have received far less attention. In this paper, we utilize a unique panel dataset of Iowa households to test the stability of revealed preference recreational demand models. We find that welfare estimates of changes in water quality are not temporally stable over more than two periods, while welfare estimates associated with a site closure are more reliable. We attribute this difference in stability to the use of alternative specific constants as a means to address issues related to omitted variable bias associated with the travel cost parameter.