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Estimating the Effect of Air Quality: Spatial versus Traditional Hedonic Price Models

Author

Listed:
  • Helen R. Neill

    () (Department of Environmental Studies, Greenspun College of Urban Affairs, University of Nevada)

  • David M. Hassenzahl

    () (Department of Environmental Studies, Greenspun College of Urban Affairs, University of Nevada)

  • Djeto D. Assane

    () (Department of Economics, College of Business, University of Nevada)

Abstract

Empirical studies of hedonic housing prices show that the spatial maximum likelihood estimation (MLE) method is preferable to the traditional ordinary least squares (OLS) hedonic method. Current computing capabilities restrict the MLE method to relatively small data sets. This paper circumvents this limitation by coupling the spatial MLE method with block bootstrapping, a form of Monte Carlo simulation that accounts for spatially dependent data. Blocks are created based on monthly and census tract information for resampling. For each month, we obtained 50 resamples of 750 observations from a data set of 15,727 residential properties to compare OLS and MLE empirical results. We find that the spatial MLE method consistently outperforms the traditional OLS method under these simulated conditions and that air quality matters irrespective of the method used.

Suggested Citation

  • Helen R. Neill & David M. Hassenzahl & Djeto D. Assane, 2007. "Estimating the Effect of Air Quality: Spatial versus Traditional Hedonic Price Models," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 1088-1111, April.
  • Handle: RePEc:sej:ancoec:v:73:4:y:2007:p:1088-1111
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    Citations

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    Cited by:

    1. Jed Cohen & Christine E. Blinn & Kevin J. Boyle & Thomas P. Holmes & Klaus Moeltner, 2016. "Hedonic Valuation with Translating Amenities: Mountain Pine Beetles and Host Trees in the Colorado Front Range," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(3), pages 613-642, March.
    2. Montero, José María & Larraz, Beatriz & Chasco, Coro, 2008. "Building an Environmental Quality Index for a big city: a spatial interpolation approach with DP2," MPRA Paper 10736, University Library of Munich, Germany.
    3. repec:eee:foreco:v:26:y:2017:i:c:p:46-55 is not listed on IDEAS
    4. Eilers, Lea, 2016. "Spatial Dependence in Apartment Offering Prices in Hamburg," Annual Conference 2016 (Augsburg): Demographic Change 145639, Verein für Socialpolitik / German Economic Association.
    5. repec:kap:jgeosy:v:20:y:2018:i:1:d:10.1007_s10109-017-0257-y is not listed on IDEAS
    6. Carriazo, Fernando & Gomez, John Alexander, 2015. "The Demand for Air Quality: A Case study in Bogotá, Colombia," Documentos CEDE Series 212855, Universidad de Los Andes, Economics Department.
    7. Constant I. Tra, 2013. "Measuring the General Equilibrium Benefits of Air Quality Regulation in Small Urban Areas," Land Economics, University of Wisconsin Press, vol. 89(2), pages 291-307.
    8. Kelley Pace, R. & LeSage, James P., 2008. "A spatial Hausman test," Economics Letters, Elsevier, vol. 101(3), pages 282-284, December.
    9. Cebula, Richard J., 2009. "The Hedonic Pricing Model Applied to the Housing Market of the City of Savannah and Its Savannah Historic Landmark District," The Review of Regional Studies, Southern Regional Science Association, vol. 39(1), pages 9-22.
    10. José-María Montero & Coro Chasco & Beatriz Larraz, 2010. "Building an environmental quality index for a big city: a spatial interpolation approach combined with a distance indicator," Journal of Geographical Systems, Springer, vol. 12(4), pages 435-459, December.
    11. Fernando Carriazo & John Alexander Gomez, 2015. "The Demand for Air Quality: A Case study in Bogotá, Colombia," DOCUMENTOS CEDE 014071, UNIVERSIDAD DE LOS ANDES-CEDE.
    12. Morito Tsutsumi & Hajime Seya, 2009. "Hedonic approaches based on spatial econometrics and spatial statistics: application to evaluation of project benefits," Journal of Geographical Systems, Springer, vol. 11(4), pages 357-380, December.
    13. Yinger, John, 2015. "Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities," Journal of Urban Economics, Elsevier, vol. 86(C), pages 9-25.
    14. Morito Tsutsumi & Hajime Seya, 2008. "Measuring the impact of large-scale transportation projects on land price using spatial statistical models," Papers in Regional Science, Wiley Blackwell, vol. 87(3), pages 385-401, August.
    15. Lori Dickes & Elizabeth Crouch, 2015. "The Impact of Changing Lake Levels on Property Values: A Hedonic Model of Lake Thurmond," The Review of Regional Studies, Southern Regional Science Association, vol. 45(3), pages 221-235, Winter.

    More about this item

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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