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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

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Volume 17, Issue 1 (Jan 2017)

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

What Extent of Welfare Loss is Caused by the Disparity between Perceived and Scientific Risks? A Case Study of Food Irradiation

Masahide Watanabe
  • Corresponding author
  • Department of Economics, Osaka University of Economics, 2-2-8 Osumi Higashiyodogawa-ku, Osaka 533-8533, Japan
  • Email:
/ Yukichika Kawata
  • Faculty of Economics, Kindai University, 4-1 Kowakae 3-chome, Higashiosaka, Osaka 577-8502, Japan
  • Email:
Published Online: 2017-01-24 | DOI: https://doi.org/10.1515/bejeap-2016-0071

Abstract

An individual perceived risk often differs from an objective risk based on the scientific evidence; risks about nuclear power generation and food technology including genetic modification and food irradiation are typical such cases. However, the extent to which welfare loss is caused by the disparity between perceived and scientific risks is unclear. Based on this gap in the literature, we conduct a discrete choice experiment to estimate the welfare loss. At the same time, we must tackle two issues arising in the estimation: endogeneity and ambiguity in the perceived risk. We construct an empirical model based on maxmin expected utility to consider ambiguity and apply a control function approach to alleviate endogeneity bias. The results show that 1) the disparity between perceived and scientific risks causes a significant welfare loss; 2) the ambiguity in the perceived risk exacerbates the welfare loss; and 3) endogeneity largely biases welfare measurement.

Keywords: ambiguity; choice experiments; endogeneity; subjective probability; maxmin expected utility

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About the article

Published Online: 2017-01-24


This work was supported by JSPS KAKENHI Grant Number 25780176.


Citation Information: The B.E. Journal of Economic Analysis & Policy, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2016-0071.

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