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Bayesians in Space: Using Bayesian Methods to Inform Choice of Spatial Weights Matrix in Hedonic Property Analyses

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Author Info

  • Mueller, Julie M.

    (Northern Arizona University)

  • Loomis, John B.

    (Colorado State University)

Abstract

The choice of weights is a non-nested problem in most applied spatial econometric models. Despite numerous recent advances in spatial econometrics, the choice of spatial weights remains exogenously determined by the researcher in empirical applications. Bayesian techniques provide statistical evidence regarding the simultaneous choice of model specification and spatial weights matrices by using posterior probabilities. This paper demonstrates the Bayesian estimation approach in a spatial hedonic property model estimating the impacts of repeated wildfires on house prices in Southern California. We find that improper choice of spatial model and weights can result in up to 5% difference in estimated coefficients and in our case study up to a $15 Million difference in total benefits of reducing wildfires in Los Angeles County.

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Bibliographic Info

Article provided by Southern Regional Science Association in its journal Review of Regional Studies.

Volume (Year): 40 (2010)
Issue (Month): 3 ()
Pages: 245-255

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Handle: RePEc:rre:publsh:v:40:y:2010:i:3:p:245-255

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Related research

Keywords: Spatial Hedonic Models; Wildfires; Bayesian Estimation;

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Cited by:
  1. Loomis, John B. & Mueller, Julie M., 2013. "A Spatial Probit Modeling Approach to Account for Spatial Spillover Effects in Dicotomous Choice Contingent Valuation Surveys," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(01), February.
  2. Zhen Xu & G. Cornelis van Kooten, 2013. "Living with Wildfire: The Impact of Historic Fires on Property Values in Kelowna, BC," Working Papers 2013-05, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  3. Seya, Hajime & Yamagata, Yoshiki & Tsutsumi, Morito, 2013. "Automatic selection of a spatial weight matrix in spatial econometrics: Application to a spatial hedonic approach," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 429-444.

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