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Valuing Locational Externalities: A GIS and Multilevel Modelling Approach

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  • Scott Orford

    (Department of City and Regional Planning, Cardiff University, Glamorgan Building, King Edward VII Avenue, Cardiff CF10 3WA, Wales)

Abstract

Hedonic house price modelling has been used extensively in the valuation of locational externalities. However, the theory of how locational externalities impact upon house prices is not reflected in the traditional measurements of location used in these studies. The result is that many hedonic house price models suffer from parameter estimates that are either insignificant or counterintuitive. In this paper I attempt to move towards a more realistic valuation of locational externalities by examining the effects of location upon house prices from a geographical as opposed to a purely economic perspective. A multilevel conceptualisation is presented, which takes into account the spatial effects of locational externalities upon house prices. A location-sensitive GIS of Cardiff and a multilevel specification of the hedonic model is then used to model these effects. I conclude that a more realistic treatment of location is required if locational externalities are to be valued successfully.

Suggested Citation

  • Scott Orford, 2002. "Valuing Locational Externalities: A GIS and Multilevel Modelling Approach," Environment and Planning B, , vol. 29(1), pages 105-127, February.
    • Handle: RePEc:sae:envirb:v:29:y:2002:i:1:p:105-127
    DOI: 10.1068/b2780
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    References listed on IDEAS

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    1. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    2. Lansford, Notie H., Jr. & Jones, Lonnie L., 1995. "Recreational And Aesthetic Value Of Water Using Hedonic Price Analysis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(2), pages 1-15, December.
    3. Waddell, Paul & Berry, Brian J L & Hoch, Irving, 1993. "Residential Property Values in a Multinodal Urban Area: New Evidence on the Implicit Price of Location," The Journal of Real Estate Finance and Economics, Springer, vol. 7(2), pages 117-141, September.
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    2. Liu, Nan & Zhao, Yuan & Ge, Jiaqi, 2018. "Do renters skimp on energy efficiency during economic recessions? Evidence from Northeast Scotland," Energy, Elsevier, vol. 165(PA), pages 164-175.
    3. Toke Emil Panduro & Cathrine Ulla Jensen & Thomas Hedemark Lundhede & Kathrine von Graevenitz & Bo Jellesmark Thorsen, 2016. "Estimating demand schedules in hedonic analysis: The case of urban parks," IFRO Working Paper 2016/06, University of Copenhagen, Department of Food and Resource Economics.

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