Probability distributions for economic surplus changes: the case of technical change in the Australian wool industry

Mullen, Alston and Wohlgenant (1989) (MAW) examined the distribution of the benefits of technical change in the Australian wool industry. Their conclusions are revisited by examining the probability distributions of changes in the welfare measures, given uncertainty about their model parameters. Sub...

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Bibliographic Details
Published in:The Australian journal of agricultural and resource economics 2000-03, Vol.44 (1), p.83-106
Main Authors: Zhao, X, Griffiths, W.E, Griffith, G.R, Mullen, J.D
Format: Article
Language:English
Subjects:
Agricultural research
Australia: Industries and resources
costs and returns
Econometrics
Economics
elasticities
probability analysis
simulation models
technical progress
uncertainty
welfare economics
Wool
wool industry
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Summary:Mullen, Alston and Wohlgenant (1989) (MAW) examined the distribution of the benefits of technical change in the Australian wool industry. Their conclusions are revisited by examining the probability distributions of changes in the welfare measures, given uncertainty about their model parameters. Subjective probability distributions are specified for the parameters and correlations among some of the parameters are imposed. Hierarchical distributions are also used to model diverse views about the specification of the subjective distributions. A sensitivity elasticity is defined through the estimation of a response surface to measure the sensitivity of the estimated research benefits to individual parameters. MAW’s conclusions are found to be robust under the stochastic approach to sensitivity analysis demonstrated in this article.
ISSN:1364-985X
1467-8489
DOI:10.1111/1467-8489.00100