Estimating producer's surplus with the censored regression model: An application to producers affected by Columbia River Basin salmon recovery

Application or the tobit to estimate economic welfare is transferred from t he consumer side to the producer side. Supply functions are estimated for m ultioutput irrigators in the Pacific Northwest. Empirical procedures are th en developed for computing expected producer's surplus from the output supp ly functions. Confidence intervals for the surplus measures are generated u sing the Krinsky-Robb method. An experiment predicts decreases in surplus g iven increases in water pumping cost. The experiment replicates possible in creases in hydroelectric prices due to the salmon recovery program in the C olumbia-Snake River Basin. Output substitution explains producers' ability to mitigate the effect of the price increases on producer's surplus.