Measuring Welfare Effects in Models with Random Coefficients

Journal of Applied Econometrics, Vol. 21, pp. 227-244, 2006

Posted: 7 May 2012

See all articles by Erik Meijer

Erik Meijer

University of Southern California; RAND Corporation

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

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Date Written: March 10, 2006

Abstract

In economic research, it is often important to express the marginal value of a variable in monetary terms. In random coefficient models, this marginal monetary value is the ratio of two random coefficients and is thus random itself. In this paper, we study the distribution of this ratio and particularly the consequences of different distributional assumptions about the coefficients. It is shown that important characteristics of the distribution of the marginal monetary value may be sensitive to the distributional assumptions about the random coefficients. The median, however, is much less sensitive than the mean.

Suggested Citation

Meijer, Erik and Rouwendal, Jan, Measuring Welfare Effects in Models with Random Coefficients (March 10, 2006). Journal of Applied Econometrics, Vol. 21, pp. 227-244, 2006, Available at SSRN: https://ssrn.com/abstract=2052875

Erik Meijer (Contact Author)

University of Southern California ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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