General Equilibrium Benefit Transfers for Spatial Externalities: Revisiting EPA's Prospective Analysis
Environmental policy analyses increasingly require the evaluation of benefits from large changes in spatially differentiated public goods. Such changes are likely to induce general equilibrium effects through changes in household expenditures and local migration, yet current practice "transfers" constant marginal values for even the largest changes. Moreover, it ignores important distributional effects of policy. This paper demonstrates that recently developed locational equilibrium models can provide transferable general equilibrium benefit measures. Our results suggest that taking account of the potential for adjustment and household heterogeneity is important. Applying benefits estimated from this method to the effect of the Clean Air Act amendments in Los Angeles, we find that the estimated annual general equilibrium benefits in 2000 and 2010 are dramatically different by income group and location. The gains range from $33 to about $2,400 per household. These differences arise from variations in the air quality conditions, income, and the effects of general equilibrium price adjustment.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Palmquist, Raymond B., 1992. "Valuing localized externalities," Journal of Urban Economics, Elsevier, vol. 31(1), pages 59-68, January.
- 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.
- Epple, Dennis & Sieg, Holger, 1997. "Estimating Equilibrium Models of Local Jurisdictions," Working Papers 97-05, Duke University, Department of Economics.
- Dennis Epple & Holger Sieg, 1998. "Estimating Equilibrium Models of Local Jurisdictions," NBER Working Papers 6822, National Bureau of Economic Research, Inc.
- Sieg, Holger & Smith, V. Kerry & Banzhaf, H. Spencer & Walsh, Randy, 2002. "Interjurisdictional housing prices in locational equilibrium," Journal of Urban Economics, Elsevier, vol. 52(1), pages 131-153, July.
- Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
- Kanemoto, Yoshitsugu, 1988. "Hedonic Prices and the Benefits of Public Projects," Econometrica, Econometric Society, vol. 56(4), pages 981-989, July.
- Yoshitsugu Kanemoto, 1985. "Hedonic Prices and the Benefits of Public Projects," Working Papers 617, Queen's University, Department of Economics.
- Smith, V. Kerry & Van Houtven, George & Pattanayak, Subhrendu, 1999. "Benefit Transfer as Preference Calibration," Discussion Papers dp-99-36, Resources For the Future.
- Starrett, David A, 1981. "Land Value Capitalization in Local Public Finance," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 306-327, April.
- Timothy J. Bartik, 2008. "Measuring the Benefits of Amenity Improvements in Hedonic Price Models," Book chapters authored by Upjohn Institute researchers,in: Richard E. Just & Darrell L. Hueth & Andrew Schmitz (ed.), Applied Welfare Economics, pages 643-654 W.E. Upjohn Institute for Employment Research.
- Timothy J. Bartik, 2008. "Measuring the Benefits of Amenity Improvements in Hedonic Price Models," Book chapters authored by Upjohn Institute researchers,in: Joseph Herriges & Catherine L. Kling (ed.), Revealed Preference Approaches to Environmental Valuation, volume 0, pages 53-64 W.E. Upjohn Institute for Employment Research.
- Timothy J. Bartik, 1988. "Measuring the Benefits of Amenity Improvements in Hedonic Price Models," Land Economics, University of Wisconsin Press, vol. 64(2), pages 172-183.
- Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, 2004. "Estimating The General Equilibrium Benefits Of Large Changes In Spatially Delineated Public Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1047-1077, November.
- Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, "undated". "Estimating the General Equilibrium Benefits of Large Changes in Spatially Delineated Public Goods," GSIA Working Papers 2003-07, Carnegie Mellon University, Tepper School of Business.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
- Bockstael, N E & McConnell, K E, 1993. "Public Goods as Characteristics of Non-market Commodities," Economic Journal, Royal Economic Society, vol. 103(420), pages 1244-1257, September.
- Palmquist, Raymond B., 1988. "Welfare measurement for environmental improvements using the hedonic model: The case of nonparametric marginal prices," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 297-312, September.
- Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
- V. Kerry Smith & H. Spencer Banzhaf, 2004. "A Diagrammatic Exposition of Weak Complementarity and the Willig Condition," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 455-466.
- V. Kerry Smith & George Van Houtven & Subhrendu K. Pattanayak, 2002. "Benefit Transfer via Preference Calibration: "Prudential Algebra" for Policy," Land Economics, University of Wisconsin Press, vol. 78(1), pages 132-152.
- Willig, Robert D., 1978. "Incremental consumer's surplus and hedonic price adjustment," Journal of Economic Theory, Elsevier, vol. 17(2), pages 227-253, April.
- Robert C. Lind, 1973. "Spatial Equilibrium, the Theory of Rents, and the Measurement of Benefits from Public Programs," The Quarterly Journal of Economics, Oxford University Press, vol. 87(2), pages 188-207. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-02-44. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.