Hedonic Prices and the Benefits of Public Projects

Kanemoto, Yoshitsugu

doi:10.2307/1912708

Cited by 86 publications

(40 citation statements)

References 8 publications

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“…In contrast both to one recent interpretation of these models as identifying a vague "capitalization effect" that mixes information from different equilibria (Klaiber andSmith 2013, Kuminoff andPope 2014) and to another interpretation of them as identifying a Marshallian welfare measure (Greenstone and Gallagher 2008), I show that the estimand defined by difference-in-differences hedonics has a clear interpretation as a lower bound on the Hicksian equivalent surplus for a non-marginal change in characteristics, even when general equilibrium effects are present. The bound is analogous to measures first suggested by Bartik (1988) and Kanemoto (1988). The bound is valid under a much wider set of condi-tions that those of Section 2.…”

Section: Introductionmentioning

confidence: 61%

“…In this model, even with heterogeneity, predicted changes in prices along a constant hedonic price function still represent non-marginal CV and EV. Palmquist's (1992) model is actually a limiting case of the model discussed by Bartik (1988) and Kanemoto (1988). Bartik and Kanemoto showed that, in general, even if the hedonic price function does shift, and even if there are adjustments in housing attributes, aggregate predicted price changes using the ex ante hedonic price function represent an upper bound on welfare changes.…”

Section: Using Only the First Stage To Evaluate Non-marginal Changes mentioning

confidence: 99%

“…When Frederick Waugh (1929) first considered hedonic methods for explaining the effect of quality factors on vegetable prices in his PhD dissertation, Eveline Burns, a professor at Columbia, commented that the effect of quality on prices was analogous to the Ricardian rent for quality-differences in the fertility of land (p. 99). By the 1980s, the term "capitalization" was being used interchangeably in potentially confusing ways to refer to cross sectional capitalization or to capitalization over time (compare Bartik 1988, Kanemoto 1988, Scotchmer 1986, and Starrett 1981. In this case, it is clear that difference-in-differences hedonic regressions identify β, the marginal effect of a change in the attribute, if dε is independent of dg after conditioning on dx.…”

mentioning

confidence: 99%

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Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"

Banzhaf¹

2015

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For decades, economists have used the hedonic model to estimate demands for the implicit characteristics of differentiated commodities. The traditional cross-sectional approach can recover marginal willingness to pay for characteristics, but has faltered over a difficult endogeneity problem for non-marginal welfare measures. I show that when marginal prices can be reliably estimated, and when panel data on household demands is available, one can construct a second-order approximation to non-marginal welfare measures using only the first-stage marginal prices. Under a single-crossing restriction, the approach remains valid for repeated cross sections of product prices.More recently, economists have questioned the assumptions under which one can identify these cross-sectional hedonic price functions, raising the possibility of unobservables that are correlated with the characteristic of interest. To overcome this problem, they have introduced difference-in-differences econometric models to identify capitalization effects. Unfortunately, the interpretation of these effects has not been clearly perceived in the literature. I additionally show these capitalization effects are the "average direct unmediated effect" on prices of a change in characteristics, which can be interpreted as a movement along the ex post hedonic price func-tion. This effect is a lower bound on Hicksian equivalent surplus.

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Section: Introductionmentioning

confidence: 61%

Section: Using Only the First Stage To Evaluate Non-marginal Changes mentioning

confidence: 99%

mentioning

confidence: 99%

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Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"

Banzhaf¹

2015

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“…An alternative proposed independently by Bartik (1988) and Kanemoto (1988) Comparison of the upper and lower bounds with our WTP estimates provides another gauge of the importance of general equilibrium adjustments for benefit estimates derived from large scale environmental changes. We compare the bounds with our WTP estimates by county.…”

Section: Comparison To Hedonic Upper and Lower Boundsmentioning

confidence: 96%

Estimating the General Equilibrium Benefits of Large Policy Changes: The Clean Air Act Revisited

Sieg¹,

Smith²,

Banzhaf³

et al. 2000

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“…It has long been understood that analogues of classic revealed preference arguments apply to hedonic prices (see for example Scotchmer (1985), Kanemoto (1988), Pollak (1989), and Pakes (2003)). These papers show that hedonic prices can be used to bound willingness to pay 1 Also related are papers studying hedonic prices in competitive markets in labor economics (Sattinger (1995), Leeth and Ruser (2003)), in environmental economics (Freeman (1995), Smith and Huang (1995), Chay and Greenstone (2005), Sieg et al (2004)) and urban and public economics (Epple and Sieg (1999)).…”

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confidence: 99%

Estimating households' willingness to pay

Griffith

Nesheim

2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe recent literature has brought together the characteristics model of utility and classic revealed preference arguments to learn about consumers' willingness to pay. We incorporate market pricing equilibrium conditions into this setting. This allows us to use observed purchase prices and quantities on a large basket of products to learn about individual household's willingness to pay for characteristics, while maintaining a high degree of ‡exibility and also avoiding the biases that arise from inappropriate aggregation.We illustrate the approach using scanner data on food purchases to estimate bounds on willingness to pay for the organic characteristic. We combine these estimates with information on households' stated preferences and beliefs to show that on average quality is the most important factor a¤ecting bounds on household willingness to pay for organic, with health concerns coming second, and environmental concerns lagging far behind.JEL: D12, L11, L81, Q51, C81 Correspondence: rgri¢ th@ifs.org.uk, l.nesheim@ucl.ac.uk Acknowledgement: The authors would like to thank James Banks, Richard Blundell, Martin Browning, Ian Crawford, Andrew Leicester, Aviv Nevo, Ariel Pakes and Carol Propper for many helpful comments. Financial support from the ESRC through the ESRC Centre for the Microeconomic Analysis of Public Policy at IFS (CPP) and the ESRC Centre for Microdata Methods and Practice (CeMMAP) is gratefully acknowledged. All errors remain the responsibility of the authors.

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Hedonic Prices and the Benefits of Public Projects

Cited by 86 publications

References 8 publications

Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"

Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"

Estimating the General Equilibrium Benefits of Large Policy Changes: The Clean Air Act Revisited

Estimating households' willingness to pay

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