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Evaluating Rubin's Causal Model for Measuring the Capitalization of Environmental Amenities

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  • H. Allen Klaiber
  • V. Kerry Smith

Abstract

This paper outlines a new framework for gauging the properties of quasi-experimental estimates of the willingness to pay (WTP) for changes in environmental and other non-market amenities. As a rule, quasi-experimental methods cannot offer alternative hypotheses to judge the quality of their quasi random assignments of treatment and control outcomes to economic agents. Their results must be judged by the explanation of the event used to construct the assignment and the counter examples offered as robustness checks for the logic of each application. This paper develops a four-step procedure for situations that rely on housing price capitalization. It is a computational analog to Chetty's [2009] call for considering the measurement objectives as part of evaluating the relevance of reduced versus structural form modeling strategies. Two diverse applications are used to establish the method's relevance for environmental problems. The first examines the value of a conversion of land cover from xeric to wet landscape. The second examines the clean-up of hazardous waste sites. We find that even when quasi-experimental methods have access to statistically ideal instruments their performance in measuring general equilibrium WTP depends on other aspects of each application.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14957.

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Date of creation: May 2009
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Handle: RePEc:nbr:nberwo:14957

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  1. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
  2. Guido W. Imbens, 2010. "Better LATE Than Nothing: Some Comments on Deaton (2009) and Heckman and Urzua (2009)," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 399-423, June.
  3. Michael Greenstone & Justin Gallagher, 2008. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 951-1003, August.
  4. Ferraro, Paul J. & McIntosh, Craig & Ospina, Monica, 2007. "The effectiveness of the US endangered species act: An econometric analysis using matching methods," Journal of Environmental Economics and Management, Elsevier, vol. 54(3), pages 245-261, November.
  5. Guido Imbens & Jeffrey Wooldridge, 2008. "Recent developments in the econometrics of program evaluation," CeMMAP working papers CWP24/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Jaren C. Pope, 2008. "Do Seller Disclosures Affect Property Values? Buyer Information and the Hedonic Model," Land Economics, University of Wisconsin Press, vol. 84(4), pages 551-572.
  7. Raj Chetty, 2008. "Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods," NBER Working Papers 14399, National Bureau of Economic Research, Inc.
  8. Kiel, Katherine A. & Williams, Michael, 2007. "The impact of Superfund sites on local property values: Are all sites the same?," Journal of Urban Economics, Elsevier, vol. 61(1), pages 170-192, January.
  9. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
  10. Beatty, Timothy K.M. & Shimshack, Jay P., 2011. "School buses, diesel emissions, and respiratory health," Journal of Health Economics, Elsevier, vol. 30(5), pages 987-999.
  11. Greenstone, Michael & Gayer, Ted, 2009. "Quasi-experimental and experimental approaches to environmental economics," Journal of Environmental Economics and Management, Elsevier, vol. 57(1), pages 21-44, January.
  12. Cropper, Maureen L, et al, 1993. "Valuing Product Attributes Using Single Market Data: A Comparison of Hedonic and Discrete Choice Approaches," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 225-32, May.
  13. Brown, James N & Rosen, Harvey S, 1982. "On the Estimation of Structural Hedonic Price Models," Econometrica, Econometric Society, vol. 50(3), pages 765-68, May.
  14. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
  15. Starrett, David A, 1981. "Land Value Capitalization in Local Public Finance," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 306-27, April.
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Cited by:
  1. Rohlfs, Chris & Sullivan, Ryan & Kniesner, Thomas J., 2013. "Hedonic Estimation under Very General Conditions Using Experimental and Quasi-Experimental Designs," IZA Discussion Papers 7554, Institute for the Study of Labor (IZA).

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