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Divergence in alternative Hicksian welfare measures: the case of revealed preference for public amenities

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  • Sudip Chattopadhyay

    (Department of Economics, San Francisco State University, 1600 Holloway Avenue, San Francisco, CA 94132, USA)

Abstract

This paper investigates the divergence between the two Hicksian welfare measures of non-traded amenity improvement associated with housing. First, the Hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures. A hedonic two-stage approach is then applied to empirically show that, for quantity changes, in contrast to hypothetical markets, divergence in real market is small. The paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect, the greater the substitution effect the smaller the divergence between the two measures. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • Sudip Chattopadhyay, 2002. "Divergence in alternative Hicksian welfare measures: the case of revealed preference for public amenities," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(6), pages 641-666.
  • Handle: RePEc:jae:japmet:v:17:y:2002:i:6:p:641-666
    DOI: 10.1002/jae.635
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    References listed on IDEAS

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    6. Timothy J. Bartik, 2008. "Measuring the Benefits of Amenity Improvements in Hedonic Price Models," Book chapters authored by Upjohn Institute researchers,in: Richard E. Just & Darrell L. Hueth & Andrew Schmitz (ed.), Applied Welfare Economics, pages 643-654 W.E. Upjohn Institute for Employment Research.
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    1. Gjestland, Arnstein & McArthur, David Philip & Osland, Liv & Thorsen, Inge, 2014. "The suitability of hedonic models for cost-benefit analysis: Evidence from commuting flows," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 136-151.

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