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Which hedonic models can we trust to recover the marginal willingness to pay for environmental amenities?

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Author Info

  • Kuminoff, Nicolai V.
  • Parmeter, Christopher F.
  • Pope, Jaren C.

Abstract

The hedonic property value model is among our foremost tools for evaluating the economic consequences of policies that target the supply of local public goods, environmental services, and urban amenities. We design a theoretically consistent and empirically realistic Monte Carlo study of whether omitted variables seriously undermine the method's ability to accurately identify economic values. Our results suggest that large gains in accuracy can be realized by moving from the standard linear specifications for the price function to a more flexible framework that uses a combination of spatial fixed effects, quasi-experimental identification, and temporal controls for housing market adjustment.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 60 (2010)
Issue (Month): 3 (November)
Pages: 145-160

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Handle: RePEc:eee:jeeman:v:60:y:2010:i:3:p:145-160

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Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Hedonic Functional form Omitted variable Quasi-experiment;

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Daniel J. Phaneuf & V. Kerry Smith & Raymond B. Palmquist & Jaren C. Pope, 2008. "Integrating Property Value and Local Recreation Models to Value Ecosystem Services in Urban Watersheds," Land Economics, University of Wisconsin Press, University of Wisconsin Press, vol. 84(3), pages 361-381.
  2. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 70(4), pages 668-75, November.
  3. Patrick Bayer & Nathaniel Keohane & Christopher Timmins, 2006. "Migration and Hedonic Valuation: The Case of Air Quality," NBER Working Papers 12106, National Bureau of Economic Research, Inc.
  4. H. Spencer Banzhaf & V. Kerry Smith, 2007. "Meta-analysis in model implementation: choice sets and the valuation of air quality improvements," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(6), pages 1013-1031.
  5. Pope, Jaren C., 2008. "Buyer information and the hedonic: The impact of a seller disclosure on the implicit price for airport noise," Journal of Urban Economics, Elsevier, Elsevier, vol. 63(2), pages 498-516, March.
  6. Timothy J. Bartik, 1988. "Measuring the Benefits of Amenity Improvements in Hedonic Price Models," Land Economics, University of Wisconsin Press, University of Wisconsin Press, vol. 64(2), pages 172-183.
  7. Kiel Katherine A. & McClain Katherine T., 1995. "House Prices during Siting Decision Stages: The Case of an Incinerator from Rumor through Operation," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 28(2), pages 241-255, March.
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  16. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(1), pages 59-80, February.
  17. Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics, Elsevier, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819 Elsevier.
  18. Walsh, Randy, 2007. "Endogenous open space amenities in a locational equilibrium," Journal of Urban Economics, Elsevier, Elsevier, vol. 61(2), pages 319-344, March.
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  21. Leggett, Christopher G. & Bockstael, Nancy E., 2000. "Evidence of the Effects of Water Quality on Residential Land Prices," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 39(2), pages 121-144, March.
  22. Kuminoff, Nicolai V. & Jarrah, Abdul Salam, 2010. "A new approach to computing hedonic equilibria and investigating the properties of locational sorting models," Journal of Urban Economics, Elsevier, Elsevier, vol. 67(3), pages 322-335, May.
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Citations

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Cited by:
  1. Ronan C. Lyons, 2013. "Inside a bubble and crash: Evidence from the valuation of amenities," Trinity Economics Papers, Trinity College Dublin, Department of Economics tep0513, Trinity College Dublin, Department of Economics.
  2. Kathrine Lausted Veie & Toke Emil Panduro, 2013. "An alternative to the standard spatial econometric approaches in hedonic house price models," IFRO Working Paper, University of Copenhagen, Department of Food and Resource Economics 2013/18, University of Copenhagen, Department of Food and Resource Economics.
  3. Christopher F. Parmeter & Jaren C. Pope, 2012. "Quasi-Experiments and Hedonic Property Value Methods," Working Papers, University of Miami, Department of Economics 2012-7, University of Miami, Department of Economics.
  4. Kousky, Carolyn & Walls, Margaret, 2013. "Floodplain Conservation as a Flood Mitigation Strategy: Examining Costs and Benefits," Discussion Papers, Resources For the Future dp-13-22, Resources For the Future.
  5. Liu, Xiangping & Taylor, Laura & Hamilton, Timothy & Grigelis, Peter, 2013. "Amenity Values of Proximity to National Wildlife Refuges: An analysis of urban residential property values," Working Papers in Economics, University of Gothenburg, Department of Economics 562, University of Gothenburg, Department of Economics.
  6. Jan Rouwendal & Ramona van Marwijk & Or Levkovich, 2014. "The Value of Proximity to Water in Residential Areas," Tinbergen Institute Discussion Papers, Tinbergen Institute 14-047/VIII, Tinbergen Institute.
  7. Yoo, James & Simonit, Silvio & Connors, John P. & Maliszewski, Paul J. & Kinzig, Ann P. & Perrings, Charles, 2013. "The value of agricultural water rights in agricultural properties in the path of development," Ecological Economics, Elsevier, Elsevier, vol. 91(C), pages 57-68.
  8. Kent Kovacs & Thomas Holmes & Jeffrey Englin & Janice Alexander, 2011. "The Dynamic Response of Housing Values to a Forest Invasive Disease: Evidence from a Sudden Oak Death Infestation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 49(3), pages 445-471, July.
  9. Livy, Mitchell & Klaiber, H. Allen, 2013. "Maintaining Public Goods: Household Valuation of New and Renovated Local Parks," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150634, Agricultural and Applied Economics Association.
  10. Abbott, Joshua K. & Allen Klaiber, H., 2013. "The value of water as an urban club good: A matching approach to community-provided lakes," Journal of Environmental Economics and Management, Elsevier, Elsevier, vol. 65(2), pages 208-224.
  11. Tuttle, Carrie M. & Heintzelman, Martin D., 2013. "The Value of Forever Wild: An Economic Analysis of Land Use in the Adirondacks," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, Northeastern Agricultural and Resource Economics Association, vol. 42(1), April.
  12. Walls, Margaret & Kousky, Carolyn & Chu, Ziyan, 2013. "Is What You See What You Get? The Value of Natural Landscape Views," Discussion Papers, Resources For the Future dp-13-25, Resources For the Future.
  13. Almer, Christian & Boes, Stefan & Nuesch, Stephan, 2013. "How do Housing Prices Adjust After an Environmental Shock? Evidence from a State-Mandated Change in Aircraft Noise Exposure," Department of Economics Working Papers, University of Bath, Department of Economics 37905, University of Bath, Department of Economics.
  14. repec:asg:wpaper:1045 is not listed on IDEAS
  15. Arnstein Gjestland & David McArthur & Liv Osland & Inge Thorsen, 2011. "Alternative methods for quantifying commuting-related benefits of new transport infrastructure," ERSA conference papers, European Regional Science Association ersa11p1223, European Regional Science Association.
  16. Gjestland, Arnstein & McArthur, David Philip & Osland, Liv & Thorsen, Inge, 2014. "The suitability of hedonic models for cost-benefit analysis: Evidence from commuting flows," Transportation Research Part A: Policy and Practice, Elsevier, Elsevier, vol. 61(C), pages 136-151.
  17. Klaiber, H. Allen & Gopalakrishnan, Sathya, 2012. "The Impact of Shale Exploration on Housing Values in Pennsylvania," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124368, Agricultural and Applied Economics Association.
  18. Ronan Lyons, 2012. "Search costs, sorting and “property ladder†effects: Evidence from the valuation of amenities," ERSA conference papers, European Regional Science Association ersa12p511, European Regional Science Association.
  19. Yoo, James & Simonit, Silvio & Connors, John P. & Kinzig, Ann P. & Perrings, Charles, 2014. "The valuation of off-site ecosystem service flows: Deforestation, erosion and the amenity value of lakes in Prescott, Arizona," Ecological Economics, Elsevier, Elsevier, vol. 97(C), pages 74-83.
  20. repec:tcd:tcduee:tep051 is not listed on IDEAS
  21. Abbott, Joshua K. & Klaiber, H. Allen, 2011. "The Value Of Water As An Urban Club Good: A Matching Approach To Hoa-Provided Lakes," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania, Agricultural and Applied Economics Association 103781, Agricultural and Applied Economics Association.
  22. Kousky, Carolyn & Walls, Margaret, 2013. "Floodplain Conservation as a Flood Mitigation Strategy: Examining Costs and Benefits," Discussion Papers, Resources For the Future dp-13-22-rev, Resources For the Future.
  23. Schilling, Brian J. & Sullivan, Kevin P. & Duke, Joshua M., 2013. "Do Residual Development Options Increase Preserved Farmland Values?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 38(3), December.

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