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Valuing Sunshine

Author

Listed:
  • Fleming, David
  • Grimes, Arthur
  • Lebreton, Laurent
  • Mare, David C.
  • Nunns, Peter

Abstract

Sunlight influences people’s real estate decisions, but city intensification may reduce sunlight exposure for neighbouring properties, causing a negative externality. There are hitherto no rigorous estimates of the cost of this externality. Using over 5,000 observations on house sales in Wellington, New Zealand, we derive the willingness to pay for an extra daily hour of sun, on average, across the year. After controlling for locational sorting and other considerations in an hedonic regression, we find that each extra daily hour of sunlight exposure is associated with a 2.4% increase in house sale price. This estimate is robust to a variety of alternative specifications. Our results can be used to price negative externalities caused by new development, so replacing inflexible regulations designed to address impacts of development on neighbours’ sunshine.

Suggested Citation

  • Fleming, David & Grimes, Arthur & Lebreton, Laurent & Mare, David C. & Nunns, Peter, 2017. "Valuing Sunshine," Motu Working Papers 290513, Motu Economic and Public Policy Research.
  • Handle: RePEc:ags:motuwp:290513
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    File URL: http://ageconsearch.umn.edu/record/290513/files/17_13.pdf
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