9391

• UCREFRP Catalog Number: 9391
• Author: Watts, G., W. R. Noonan, H. R. Maddux and D. S. Brookshire.
• Title: The Endangered Species Act and Critical Habitat Designation
• USFW Year: 1997.
• USFW - Doc Type: An Integrated Biological and Economic Approach.
• Copyright Material: NO

QL =

~ 0 "
Llrp.X
, I

~ " "
LIP, X,

Qp
~ " 0
LIP, XI

~ 0 0
LIP, Xi

where the superscript n refers to the new prices and quantities and the superscript 0 refers to the
old prices and quantities. These can be written in level form and the Laspeyres index is written
as:

QL = Epi"Axi

As Boadway and Bruce (1984) show, this is a first order approximation of the equivalent
variation (EV) and the compensating variation (CV) associated with the quantity changes
between resource allocations. Since the higher order terms require more information than is
observable in price and quantity changes, these indices are widely used to approximate changes
in consumer surplus due to exogenous shocks to the economy. 13 If these indices are positive
(negative) consumer surplus has increased (decreased).

The input data for the CGE model were derived from three sources. The IMPLAN data bases
(1982) provided the data necessary to construct the inter-industry flows matrix (the input-output
table) and the national accounts data which are required to construct the Social Accounts Matrix
(SAM). In addition, the production sectors required capital stock data and labor data. The labor
data were included in the IMPLAN data base although adjustments were required to convert
these data to full time equivalents (FTEs). The capital stock data were obtained from the Census
of Agriculture and the BEA Wealth Data disks. Tax data for household and business taxes were
included in the national accounts portions of the IMPLAN data bases.

I) Of course, there are various means of obtaining exact measures of consumer surplus changes from
individual expenditure functions. This is widely used when dealing with changes in a price or quantity of a single
good but the data requirements are beyond what is typically available in a general equilibrium analysis. In fact, the
story is much more complex. The Laspeyres and Paasche indices just described relate to a single consumer. In
order to aggregate these measures over all consumers in the economy some rather stringent conditions must be met.
In particular, the marginal social utility of income must be the same for all persons. This is not likely to be the case.
However, policy questions must be addressed and it is common to add the surplus changes across consumers.
Boadway and Bruce provide some rationale for this approach in pages 262-263.

i
,

21