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Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"

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  • H. Spencer Banzhaf

Abstract

Traditional cross-sectional estimates of hedonic price functions can recover marginal willingness to pay for characteristics, but face endogeneity problems for estimating non-marginal welfare measures. I show that when panel data on household demands are available, one can construct a second-order approximation to non-marginal welfare measures using only the first-stage marginal prices. With repeated cross sections of product prices, the measure can be set identified or, under a single-crossing restriction, point identified. Bounds also can be constructed when there are mobility costs. Finally, a variant remains valid when individual preferences shift over time.

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  • H. Spencer Banzhaf, 2015. "Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"," NBER Working Papers 21485, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21485
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    More about this item

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H4 - Public Economics - - Publicly Provided Goods
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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