The Effect of Aggregate Response Assumptions on Environmental Impact Analyses

The authors report on the implications of alternative response assumptions on the estimates of changes in welfare, prices, and production due to environmental policy changes. They examine a variety of aggregate response assumptions within a mathematical programming framework using a case example assessment involving the economic effects of air quality changes on agriculture. This type of research is used by the Environmental Protection Agency to evaluate the efficiency of alternative national ambient air quality standards. The results indicate that the choice of technique and associated response assumptions could provide different estimates of distributional consequences, and the authors conclude that selection of the appropriate specification of a microsector model is difficult. 15 references, 2 tables.