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General Equilibrium Benefit Transfers for Spatial Externalities: Revisiting EPA's Prospective Analysis

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Author Info
Smith, V. Kerry
Banzhaf, H. Spencer () (Resources for the Future)
Walsh, Randy

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Abstract

Environmental policy analyses increasingly require the evaluation of benefits from large changes in spatially differentiated public goods. Such changes are likely to induce general equilibrium effects through changes in household expenditures and local migration, yet current practice "transfers" constant marginal values for even the largest changes. Moreover, it ignores important distributional effects of policy. This paper demonstrates that recently developed locational equilibrium models can provide transferable general equilibrium benefit measures. Our results suggest that taking account of the potential for adjustment and household heterogeneity is important. Applying benefits estimated from this method to the effect of the Clean Air Act amendments in Los Angeles, we find that the estimated annual general equilibrium benefits in 2000 and 2010 are dramatically different by income group and location. The gains range from $33 to about $2,400 per household. These differences arise from variations in the air quality conditions, income, and the effects of general equilibrium price adjustment.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-02-44.

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Date of creation: 01 Sep 2002
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Handle: RePEc:rff:dpaper:dp-02-44

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Related research
Keywords: air quality clean air act non-market valuation Tiebout model

Other versions of this item:

Find related papers by JEL classification:
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416. [Downloadable!] (restricted)
  2. Palmquist, Raymond B., 1992. "Valuing localized externalities," Journal of Urban Economics, Elsevier, vol. 31(1), pages 59-68, January. [Downloadable!] (restricted)
  3. Lind, Robert C, 1973. "Spatial Equilibrium, the Theory of Rents, and the Measurement of Benefits from Public Programs," The Quarterly Journal of Economics, MIT Press, vol. 87(2), pages 188-207, May. [Downloadable!] (restricted)
  4. Bockstael, N E & McConnell, K E, 1993. "Public Goods as Characteristics of Non-market Commodities," Economic Journal, Royal Economic Society, vol. 103(420), pages 1244-57, September. [Downloadable!] (restricted)
  5. Smith, V. Kerry & Van Houtven, George & Pattanayak, Subhrendu, 1999. "Benefit Transfer as Preference Calibration," Discussion Papers dp-99-36, Resources For the Future. [Downloadable!]
  6. 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. [Downloadable!] (restricted)
  7. V. Kerry Smith & H. Spencer Banzhaf, 2004. "A Diagrammatic Exposition of Weak Complementarity and the Willig Condition," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 86(2), pages 455-466, 05. [Downloadable!] (restricted)
  8. Palmquist, Raymond B., 1988. "Welfare measurement for environmental improvements using the hedonic model: The case of nonparametric marginal prices," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 297-312, September. [Downloadable!] (restricted)
  9. Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, . "Estimating the General Equilibrium Benefits of Large Changes in Spatially Delineated Public Goods," GSIA Working Papers 2003-07, Carnegie Mellon University, Tepper School of Business.
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  10. Kanemoto, Yoshitsugu, 1988. "Hedonic Prices and the Benefits of Public Projects," Econometrica, Econometric Society, vol. 56(4), pages 981-89, July. [Downloadable!] (restricted)
  11. Sieg, Holger & Smith, V. Kerry & Banzhaf, H. Spencer & Walsh, Randy, 2002. "Interjurisdictional housing prices in locational equilibrium," Journal of Urban Economics, Elsevier, vol. 52(1), pages 131-153, July. [Downloadable!] (restricted)
  12. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January. [Downloadable!] (restricted)
  13. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August. [Downloadable!] (restricted)
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