IDEAS home Printed from https://ideas.repec.org/p/azt/cemmap/07-02.html
   My bibliography  Save this paper

Identification and estimation of hedonic models

Author

Listed:
  • Ivar Ekeland
  • James Heckman
  • Lars Nesheim

Abstract

This paper considers the identification and estimation of hedonic models. We establish that technology and preferences in a separable version of the hedonic model are genericallyidentified up to ane transformations from data on demand and supply in a single hedonicmarket. For a very general parametric structure, preferences and technology are fullyidentified from demand data. Much of the confusion in the empirical literature that claimsthat hedonic models estimated on data from a single market are fundamentally underidentifiedis based on linearizations that do not use all of the information in the model. Theexact economic model that justifies the linear approximations has strange properties sothe approximation is doubly poor. A semiparametric estimation method is proposed, andalternative estimators are considered. Instrumental variables estimators can be applied to identify technology and preference parameters from a single market even though there are no exclusion restrictions.

Suggested Citation

  • Ivar Ekeland & James Heckman & Lars Nesheim, 2002. "Identification and estimation of hedonic models," CeMMAP working papers 07/02, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:07/02
    DOI: 10.1920/wp.cem.2002.0702
    as

    Download full text from publisher

    File URL: https://www.cemmap.ac.uk/wp-content/uploads/2020/08/CWP0702.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.1920/wp.cem.2002.0702?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. James Heckman & Edward Vytlacil, 1998. "Instrumental Variables Methods for the Correlated Random Coefficient Model: Estimating the Average Rate of Return to Schooling When the Return is Correlated with Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 974-987.
    2. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 60-109, February.
    3. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    4. 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.
    5. Kahn, Shulamit & Lang, Kevin, 1988. "Efficient Estimation of Structural Hedonic Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 157-166, February.
    6. S. Darolles & Y. Fan & J. P. Florens & E. Renault, 2011. "Nonparametric Instrumental Regression," Econometrica, Econometric Society, vol. 79(5), pages 1541-1565, September.
    7. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
    8. Amemiya, Takeshi, 1975. "The nonlinear limited-information maximum- likelihood estimator and the modified nonlinear two-stage least-squares estimator," Journal of Econometrics, Elsevier, vol. 3(4), pages 375-386, November.
    9. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    10. Brown, James N & Rosen, Harvey S, 1982. "On the Estimation of Structural Hedonic Price Models," Econometrica, Econometric Society, vol. 50(3), pages 765-768, May.
    11. Robert C. Feenstra & Gordon H. Hanson, 2004. "Intermediaries in Entrepôt Trade: Hong Kong Re‐Exports of Chinese Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 3-35, March.
    12. Lars Nesheim, 2004. "Equilibrium Sorting of Heterogeneous Consumers Across Locations," Econometric Society 2004 North American Summer Meetings 337, Econometric Society.
    13. Theodore W. Schultz, 1974. "Economics of the Family: Marriage, Children, and Human Capital," NBER Books, National Bureau of Economic Research, Inc, number schu74-1, March.
    14. Umbeck, John, 1980. "Shipping the Good Apples Out: Some Ambiguities in the Interpretation of "Fixed Charge"," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 199-208, February.
    15. Peter K. Schott, 2001. "Do Countries Specialize?," Yale School of Management Working Papers ysm173, Yale School of Management.
    16. Kala Krishna, 1990. "Export Restraints With Imperfect Competition: A Selective Survey," NBER Working Papers 3244, National Bureau of Economic Research, Inc.
    17. Borcherding, Thomas E & Silberberg, Eugene, 1978. "Shipping the Good Apples Out: The Alchian and Allen Theorem Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 86(1), pages 131-138, February.
    18. Amemiya, Takeshi, 1974. "The nonlinear two-stage least-squares estimator," Journal of Econometrics, Elsevier, vol. 2(2), pages 105-110, July.
    19. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    20. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    21. Helen Tauchen & Ann Dryden Witte, 2001. "Estimating Hedonic Models: Implications of the Theory," NBER Technical Working Papers 0271, National Bureau of Economic Research, Inc.
    22. Peter K. Schott, 2001. "Do Rich and Poor Countries Specialize in a Different Mix of Goods? Evidence from Product-Level US Trade Data," NBER Working Papers 8492, National Bureau of Economic Research, Inc.
    23. James J. Heckman & Edward J. Vytlacil, 2000. "Local Instrumental Variables," NBER Technical Working Papers 0252, National Bureau of Economic Research, Inc.
    24. James N. Brown, 1983. "Structural Estimation in Implicit Markets," NBER Chapters, in: The Measurement of Labor Cost, pages 123-152, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
    2. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    3. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2004. "Entry, Pricing, and Product Design in an Initially Monopolized Market," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 188-225, February.
    4. Fève, Frédérique & Fève, Patrick & Florens, Jean-Pierre, 2002. "Attribute Choices and Structural Econometrics of Price Elasticity of Demand," IDEI Working Papers 155, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2003.
    5. Derek Neal, 2004. "The Measured Black-White Wage Gap among Women Is Too Small," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 1-28, February.
    6. James J. Heckman & Rosa L. Matzkin & Lars Nesheim, 2010. "Nonparametric Identification and Estimation of Nonadditive Hedonic Models," Econometrica, Econometric Society, vol. 78(5), pages 1569-1591, September.
    7. Henrik Andersson, 2008. "Willingness to Pay for Car Safety: Evidence from Sweden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(4), pages 579-594, December.
    8. Dennis W. Carlton & Alan S. Frankel & Elisabeth M. Landes, 2004. "The Control of Externalities in Sports Leagues: An Analysis of Restrictions in the National Hockey League," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 268-288, February.
    9. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2010. "The New Economics of Equilibrium Sorting and its Transformational Role for Policy Evaluation," NBER Working Papers 16349, National Bureau of Economic Research, Inc.
    10. Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819, Elsevier.
    11. James J. Heckman, 2003. "Simulation and Estimation of Hedonic Models," CESifo Working Paper Series 1014, CESifo.
    12. Jaewoo Ryoo & Sherwin Rosen, 2004. "The Engineering Labor Market," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 110-140, February.
    13. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc.
    14. Zhang, Congwen & Boyle, Kevin J. & Kuminoff, Nicolai V., 2015. "Partial identification of amenity demand functions," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 180-197.
    15. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "Residential Segregation in General Equilibrium," Working Papers 885, Economic Growth Center, Yale University.
    16. Manuel Landajo & Celia Bilbao & Amelia Bilbao, 2012. "Nonparametric neural network modeling of hedonic prices in the housing market," Empirical Economics, Springer, vol. 42(3), pages 987-1009, June.
    17. Hao Li & Wing Suen, 2004. "Delegating Decisions to Experts," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 311-335, February.
    18. repec:hal:spmain:info:hdl:2441/4kovgv3hs883bok2tvdkibejb6 is not listed on IDEAS
    19. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    20. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2002. "Identifying Hedonic Models," American Economic Review, American Economic Association, vol. 92(2), pages 304-309, May.
    21. Laura Andersen & Sinne Smed, 2013. "What is it consumers really want, and how can their preferences be influenced? The case of fat in milk," Empirical Economics, Springer, vol. 45(1), pages 323-347, August.

    More about this item

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:azt:cemmap:07/02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dermot Watson (email available below). General contact details of provider: https://edirc.repec.org/data/ifsssuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.