Spatial Hedonics and the Willingness to Pay for Residential Amenities
AbstractHousing rents may be influenced by characteristics of nearby properties, an effect captured by spatial autoregression in a hedonic rent equation. We investigate the implications of spatial autoregression for measuring the marginal welfare effects due to a change in a residential amenity such as air quality. We show that if spatial price interdependence arises from technological spillovers, such that utility depends directly on neighboring property values, then the welfare change is given by the reduced form of the autoregressive model, effectively applying a "spatial multiplier" to the relevant implicit price. If instead spatial interdependence arises from merely pecuniary spillovers, as is commonly supposed in motivating spatial autoregression, then no spatial multiplier on implicit prices is called for in computing welfare; but it is then especially important to use the autoregressive model to measure those implicit prices.
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Bibliographic InfoPaper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050631.
Length: 17 pages
Date of creation: Jun 2006
Date of revision: Feb 2007
Spatial autocorrelation; spatial lag; welfare; willingness to pay; hedonic price function;
Other versions of this item:
- Kenneth A. Small & Seiji S.C. Steimetz, 2012. "Spatial Hedonics And The Willingness To Pay For Residential Amenities," Journal of Regional Science, Wiley Blackwell, vol. 52(4), pages 635-647, October.
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-03 (All new papers)
- NEP-ENV-2006-09-03 (Environmental Economics)
- NEP-GEO-2006-09-03 (Economic Geography)
- NEP-URE-2006-09-03 (Urban & Real Estate Economics)
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