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Nonparametric estimation of nonadditive hedonic models

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  • James Heckman

    () (Institute for Fiscal Studies and University of Chicago)

  • Rosa Matzkin

    () (Institute for Fiscal Studies and UCLA)

  • Lars Nesheim

    () (Institute for Fiscal Studies and cemmap and UCL)

Abstract

We analyze equilibria in hedonic economies and study conditions that lead to identification of structural preference parameters in hedonic economies with both additive and nonadditive marginal utility and marginal product functions. The latter class is more general, allows for heterogeneity in the curvature of consumer utility, and can result in conditions that lead to bunching. Such bunching has been largely ignored in the previous literature. We then present methods to estimate marginal utility and marginal product functions that are nonadditive in the unobservable random terms, using observations from a single hedonic equilibrium market. These methods are important when statistical tests reject additive specifications or when prior information suggests that consumer or firm heterogeneity in the curvature of utility or production functions is likely to be significant. We provide conditions under which these types of utility and production functions are nonparametrically identified, and we propose nonparametric estimators for them. The estimators are shown to be consistent and asymptotically normal. When the assumptions required to use single market methods are unjustified, we show how multimarket data can be used to estimate the structural functions.

Suggested Citation

  • James Heckman & Rosa Matzkin & Lars Nesheim, 2005. "Nonparametric estimation of nonadditive hedonic models," CeMMAP working papers CWP03/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:03/05
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    File URL: http://cemmap.ifs.org.uk/wps/cwp0305.pdf
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    References listed on IDEAS

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    5. Joel L. Horowitz, 1996. "Bootstrap Methods For Covariance Structures," Econometrics 9610003, EconWPA.
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    Citations

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    Cited by:

    1. Lars Nesheim, 2006. "Hedonic price functions," CeMMAP working papers CWP18/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. Roberto Cortes Conde, 2008. "Spanish America Colonial Patterns: The Rio de La Plata," Working Papers 96, Universidad de San Andres, Departamento de Economia, revised Mar 2008.
    3. Heckman, James J. & Matzkin, Rosa & Nesheim, Lars, 2003. "Simulation and Estimation of Hedonic Models," IZA Discussion Papers 843, Institute for the Study of Labor (IZA).
    4. Pierre-André Chiappori & Robert McCann & Lars Nesheim, 2010. "Hedonic price equilibria, stable matching, and optimal transport: equivalence, topology, and uniqueness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 42(2), pages 317-354, February.
    5. 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.
    6. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.

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