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Evaluating Rubin's Causal Model for Measuring the Capitalization of Environmental Amenities

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  • H. Allen Klaiber
  • V. Kerry Smith

Abstract

This paper outlines a new framework for gauging the properties of quasi-experimental estimates of the willingness to pay (WTP) for changes in environmental and other non-market amenities. As a rule, quasi-experimental methods cannot offer alternative hypotheses to judge the quality of their quasi random assignments of treatment and control outcomes to economic agents. Their results must be judged by the explanation of the event used to construct the assignment and the counter examples offered as robustness checks for the logic of each application. This paper develops a four-step procedure for situations that rely on housing price capitalization. It is a computational analog to Chetty's [2009] call for considering the measurement objectives as part of evaluating the relevance of reduced versus structural form modeling strategies. Two diverse applications are used to establish the method's relevance for environmental problems. The first examines the value of a conversion of land cover from xeric to wet landscape. The second examines the clean-up of hazardous waste sites. We find that even when quasi-experimental methods have access to statistically ideal instruments their performance in measuring general equilibrium WTP depends on other aspects of each application.

Suggested Citation

  • H. Allen Klaiber & V. Kerry Smith, 2009. "Evaluating Rubin's Causal Model for Measuring the Capitalization of Environmental Amenities," NBER Working Papers 14957, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14957
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    Cited by:

    1. V. Smith & Eric Moore, 2010. "Behavioral Economics and Benefit Cost Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(2), pages 217-234, June.
    2. Rohlfs, Chris & Sullivan, Ryan & Kniesner, Thomas J., 2013. "Hedonic Estimation under Very General Conditions Using Experimental and Quasi-Experimental Designs," IZA Discussion Papers 7554, Institute for the Study of Labor (IZA).
    3. Eriksen, Michael D. & Kniesner, Thomas J. & Rohlfs, Chris & Sullivan, Ryan, 2016. "Toward more general hedonic estimation: Clarifying the roles of alternative experimental designs with an application to a housing attribute," Regional Science and Urban Economics, Elsevier, vol. 57(C), pages 54-62.
    4. Binner, Amy & Day, Brett, 2015. "Exploring mortgage interest deduction reforms: An equilibrium sorting model with endogenous tenure choice," Journal of Public Economics, Elsevier, vol. 122(C), pages 40-54.
    5. Kuminoff, Nicolai V. & Jarrah, Abdul Salam, 2010. "A new approach to computing hedonic equilibria and investigating the properties of locational sorting models," Journal of Urban Economics, Elsevier, vol. 67(3), pages 322-335, May.

    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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