Welfare Measurement - JEM127
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Syllabus_Welfare_2010.pdf | Syllabus 2010 | Mgr. Milan Ščasný, Ph.D. |
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Poslední úprava: Mgr. Milan Ščasný, Ph.D. (22.02.2010)
Summer Semester 2009/2010; Thursdays, 9:30-10:50, #105 Abstract and motivation To derive socially desirable and economic efficient solutions require comparing all involved costs and benefits. Direct compliance cost estimate is quite straightforward; we need to get data on observed (at real market) or directly reported expenses of real agents, and if properly done, supplement this information by agent? response. Quantification of indirect or economy-wide effects requires more effort; only impact assessment performed in general-equilibrium framework by using a kind of macro structural model would not ignore all indirect impacts and feedbacks in the original market. However, even this analysis need not be complete. This would be a case, if policy has certain welfare effect due to changes on quantity or quality of goods and services that are not usually traded at (real) market. For instance, authority requires to abate pollution in power sector (and reduce associated external costs) that would result in positive effects on consumers? utility through induced improvement on health status and environmental quality; health policy can avoid premature death, increase life expectancy, or decrease probability of treatment failure; or, local authority can decide on developing green zones for their residents that would now bring less noise, better quality of air and more option for leisure, in general higher standard of living. In fact, all of such examples would deliver welfare improvement, but cannot be purchased in any supermarket. But policy that delivers them would also induce economic costs. The key question for us is what these benefits are worth and how these benefits can be compared to costs in order to assess economic rationale of policy. This course just aims at methods to quantify so called non-market goods and services. Specifically, a student will learn the appropriate methods of measuring welfare effects due to changes in quantity or quality of non-marketed goods in order to attain monetary value on life saved, avoided cough or cancer, changes in ecosystem, recreation, or organic food. As the starting point, the microeconomic theory of consumer behaviour is explored to describe theoretically-sound welfare measures. Then, principles of revealed preference and stated preference methods will be overviewed: the student will learn about travel cost, hedonic pricing and averting behaviour method (revealed preference), contingent valuation and choice experiment (stated preference). Welfare measurement of price changes is discussed in brief since it is a core of other master courses. The aim of this course is to get familiar with the non-market valuation methods in order to appropriately use them in Cost-Benefit Analysis. Lectures Milan Ščasný, PhD., milan.scasny@czp.cuni.cz Jan Melichar, PhD., jan.melichar@czp.cuni.cz Office: Centrum pro otázky životního prostředí, Univerzita Karlova v Praze, Jose Martiho 2, Praha 6 (metro A ?Dejvická?, after tram fading to ?Divoká Šárka? and get off ?U Džbánu?) Structure of the course Theory and practise (CBA) Revealed preference based techniques Stated preference based techniques Welfare analysis and distributional aspects of regulation Pre-requisites Microeconomics Training in econometrics and public economics would be an asset. Requirements The student is required to succeed the lecture: (1) to prepare 5 homeworks (10 points each homework, 50 point in total) (2) to write a final exam test with satisfactory result (50 points is maximum) (3) to undergo the oral exam if student likes to get better grade Grades 100 - 87 points A ?excellent? (výborně) 86 - 73 points B ?very good ? (chvalitebně) 72 - 60 points C ?good? (výborně) 59 and less ?failed ? (nedostatečně) Course Outline (date is only indicative and might change) 25 February Proper Welfare Measures (MS) 4 March Environmental Cost-Benefit Analysis (JM) 11 March Conducting a Survey and Sampling Strategy (JU) 18 March Hedonic Price Models (JM) 25 March Recreation Demand Models (JM) 1 April Recreation Demand Models (JM) 8 April Contingent Valuation 1 (MS) 15 April Contingent Valuation 2 (MS) 22 April Conjoint Choice Models 1 (JM) 29 April Health Valuation, Cost Based Methods (MS+VM) 6 May Conjoint Choice Models 2 (JM) 13 May Welfare Measurement of Tax Reform 1 (MS) 20 May Welfare Measurement of Tax Reform 2 (MS) Lectures I. Theory And Practise of Welfare measurement Proper Welfare Measures - Two formulations of Demand Function (Marshallian / uncompensated versus Hicksian / compensated demand) - Consumer Surplus, Equivalent Variation and Compensating Variation - Equivalent and Compensating Surplus Due to Changes in Uncontrolled Goods and Services - Classification of Valuation Methods Readings (obligatory): Markandya, A. (2004): Economic Principles And Overview of Valuation Methods for Environmental Impacts. In, Ščasný, M., Melichar., J., ed. (2004), Development of the Czech Society in the European Union. (Proceedings from the Conference held on October 21-23, 2004). Part V, Non-market Valuation Methods in environmental area. Charles University in Prague, Faculty of Social Sciences and Charles University Environment Center, 21-23 October 2004. Matfyzpress, Prague. ISBN 80-86732-35-5; str. 19-41. Welfare measurement and Cost-Benefit Analysis - Introduction to cost-benefit analysis - Types and stages of CBA - Shadow pricing - Benefit transfer techniques - Sensitivity analysis Readings: Navrud, S. and Ready, R.: Environmental Value Transfer: Issues and Methods Kluwer Academic Press. 2007. ISBN: 1-4020-4081-8. Ready, R., Navrud, S., Day, B., Dubourg, W.R., Machado, F., Mourato, S., Spanninks, F. and Rodriquez, M.: Benefit Transfer in Europe: How Reliable are Transfers between Countries? Environmental and Resource Economics. 2004. Vol. 29, 67-82. Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L. Cost-benefit analysis. Concepts and practice. Parson: New Jersey. 2006. Pearce, D., Mourato, S, Atkinson, G. (2006), Cost-Benefit Analysis. OECD book. Conducting a Survey and Sampling Strategy (by Jan Urban) - How to conduct a survey - Ensuring representativeness of the sample - Pros and Cons of Sampling Strategies II. Valuation based on Revealed Preferences Hedonic Price - Historical background - First and second stage model - Hedonic price function and implicit price - Applications of the hedonic house price method - Data requirements and problems Readings: Bateman, I., Day, B., Lake, I., Lovett, A., The Effect of Road Traffic on Residential Property Values: A Literature Review and Hedonic Pricing Study, Economic and Social Research Council, 2001. Day, B., The Theory of Hedonic Market: Obtaining welfare measures for changes in environmental quality using hedonic market data, Economics for the Environment Consultancy, 2001. Recreation demand models - History and typology of travel cost models - Zonal and individual travel cost method - Random utility models - Recreation data - Time and travel cost estimation - Econometric issues in recreation demand modeling Readings: Parsons, G. R. (2003): The Travel Cost Method. In Champ, P. A., Boyle, K. J., Brown, T. C., (eds.) A Primer on Nonmarket Valuation. London: Kluwer Academic Publishers. ISBN 0-7923-6498-8. Phaneuf, D. J. a Smith, V. K. (2005): Recreation Demand Models, In: Mäler, K. G. a Vincent, J. R. (eds), Handbook of Environmental Economics, Volume 2, Amsterdam: North-Holland. Ward, F.A., Beal D.: Valuing Nature with Travel Cost Models: A Manual. Edward Elgar: Cheltenham. 2000. ISBN: 1-84064-078-2. III. Valuation based on Stated Preferences Contingent Valuation - Willingness-to-pay versus Willingness-to-accept - Biases and designs - Steps in CV survey - Estimating WTP Conjoint Choice Experiments - Economic foundations of choice modeling - Choice experiment, contingent rating, contingent ranking, pair comparison - Attributes, levels, experimental design, construction of choice sets - Analysis of choice modelling data Readings: Bateman, I.J., Carson, R.T., Hanemann, M., Hanley, N., Hett, T., Jones-Lee, M., Loomes, G., Mourato, S., Özdemiro?lu, E., Pearce, D.W., Sugden, R., Swanson, J.: Economic Valuation with Stated Preference Techniques: A Manual. Edward Elgar: Cheltenham. 2002. ISBN: 1-84376-852-6. Hanley N., Wright E. R., Gary Koop: Modelling Recreation Demand Using Choice Experiments: Climbing in Scotland, Environmental and Resource Economics 22: 449-466, 2002 Hanley N., Mourato S., Wright E. R.: Choice Modelling Approaches: A Superior Alternative for Environmental Valuation? Journal of Economic Surveys Vol 15, No. 3, 435-462, 2001 IV. Applications and Tax incidence Health Benefit Valuation (in collaboration with Vojtěch Máca) - Dose-response functions and health end-points - Cost-of-illness - Dis-welfare due to mortality and morbidity (hedonic, CV, CCE) - Is there a value of silence? - Value of premature mortality (mortality risk vs life extension), human capital approach, hedonic wage and stated preferences Welfare Measurement of Tax Reform - Direct financial effects - Change in expenditures versus in welfare - Environmental and health benefits - Total burden versus excess of burden Other readings (recommended): West, S. E., Williams, R.C. III (2004): Estimates from a consumer demand system: implications for the incidence of environmental taxes. Journal of Environmental Economics and Management 47 (2004), 535-558. Useful textbooks (selected chapters): Bateman, I.J., Carson, R.T., Hanemann, M., Hanley, N., Hett, T., Jones-Lee, M., Loomes, G., Mourato, S., Özdemiro?lu, E., Pearce, D.W., Sugden, R., Swanson, J.: Economic Valuation with Stated Preference Techniques: A Manual. Edward Elgar: Cheltenham. 2002. ISBN: 1-84376-852-6. Freeman, A.M.III.: The Measurement of Environmental and Resource Values: Theory and Methods. Resources for the Future: Washington, DC. 2003. ISBN: 1-89185-362-7. Markandya, A., Harou, P., Bell?, L.G., Cistulli, V.: Environmental Economics for Sustainable Growth: A Handbook for Practitioners. Edward Elgar: Cheltenham. 2002. ISBN: 1-84064-812-0. Pearce, David, Atkinson, Giles, Mourato Susana (2006), Cost-Benefit Analysis and the Environment. Recent Developments. OECD, Paris 2006. Dvořák, A., Brůha, J., Brůhová-Foltýnová, H., Melichar, J., Ščasný, M. (2007), Kapitoly z ekonomie přírodních zdrojů a oceňování životního prostředí. Vysoká škola ekonomická v Praze, Oeconomica - Praha 2007. ISBN: 978-80-245-1253-2. Other readings (excerpt): Garrod, G. Willis, K.G.: Economic Valuation of the Environment. Edward Elgar: Cheltenham. 2000. ISBN: 1-84064-327-5. Haab, T., McConnell, K. E.: Valuing Environmental and Natural Resources: the econometrics of non-market valuation. Edward Elgar: Cheltenham. 2002. ISBN: 1-84376-388-5. Hanneman, W.M. Willingness to Pay and Willingness to Accept: How much can they differ? American Economic Review. 1991. 81: 635-647. Kolstad, C.D.: Environmental Economics. Oxford University Press. 2000. ISBN 0-19-511954-1. Krutilla, J.V.: Conservation Reconsidered. American Economic Review. 1967. 57: 777-786. Ward, F.A., Beal D.: Valuing Nature with Travel Cost Models: A Manual. Edward Elgar: Cheltenham. 2000. ISBN: 1-84064-078-2. Ščasný, M., Melichar., J., ed. (2004), Development of the Czech Society in the European Union. (Proceedings from the Conference held on October 21-23, 2004). Part V: Non-market Valuation Methods in environmental area. Charles university in Prague, Faculty of Social Sciences and Charles University Environment Center, 21-23 October 2004. Matfyzpress, Prague. ISBN 80-86732-35-5. |