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Probability distributions for economic surplus changes: the case of technical change in the Australian wool industry
Author(s) -
Zhao Xueyan,
Griffiths William E.,
Griffith Garry R.,
Mullen John D.
Publication year - 2000
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.00100
Subject(s) - econometrics , probability distribution , sensitivity (control systems) , mathematics , probability model , elasticity (physics) , economics , statistics , engineering , physics , electronic engineering , thermodynamics
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.