A Hedonic Model of Interregional Wages, Rents, and Amenity Values*

Abstract

This paper develops a general multimarket hedonic model appropriate for a national, interregional study of wages, housing prices, and location-specific amenities. The model encompasses the effects of interregional location, intraurban location, and city size. Typically, hedonic studies focus on a single market such as labor or housing and ignore interactions implicit in a more global compensation mechanism. Examination of the comparative statics of our model indicates that single-market differentials are partial prices and are unreliable measures of amenity values in an interregional context. Unbiased amenity values are estimated for a comprehensive set of amenities using data on housing prices for 34,414 households and wages for 46,004 workers from the 1980 Census of Population and Housing. Statistically significant differences in housing prices and wages are found due to amenities.

Population growth in European cities: Weather matters – but only nationally

“…Various studies (for example, Hoehn et al, 1987;Blomquist et al, 1988;or Gyourko and Tracy, 1991) have found convincing evidence that interregional environmental differences are valued and capitalised in the way predicted by the compensating differentials model. However, as Gyourko et al, 1999 conclude: '…recent work….reports the presence of large city-specific error components in the underlying….estimated …local trait prices….it turns out that….the level of imprecision is such that much better descriptions of local amenity and fiscal conditions, plus superior controls for housing, worker and job quality are needed….'…”

Place‐to‐Place Rent Comparisons among Canadian Cities

“…Muellbauer (1974) questions this approach. Other authors use a Box-Cox procedure to find the best fitting form: see Linneman (1980), Quigley (1982), Goodman and Kawai (1984), and Hoehn, Berger, and Blomquist (1987). In the present paper, no transformations are used since almost all of the hedonic determinants here are binary.…”

Are Green Cities Nice Places to Live? Examining the Link between Urban Sustainability and Quality of Life

“…Since the work of Rosen (1979), Haurin (1980) and Roback (1982;1988), a growing body of literature has tried to produce theoretically consistent quality-of-life rankings for urban areas by deriving wage and rent differentials via hedonic methods, calculating the implicit prices of locationspecific amenities which are then used as utility valuation weights. 11 While this early literature focuses on interurban differences and treats cities as spatially homogenous entities, extensions by Hoehn, Berger, and Blomquist (1987) incorporate urban structure and intraurban location into the quality-of-life framework and allow for amenity variation both within and across urban areas. In this setting, the relationship between quality of life and urban size remains an empirical matter, ultimately determined by the precise nature of these agglomeration effects and the relative impact of (dis)amenities on production and consumption.…”