An Embarrassment Of Riches: Confronting Omitted Variable Bias And Multiscale Capitalization In Hedonic Price Models

Joshua Abbott, H. Allen Klaiber

    Research output: Contribution to journalArticle

    53 Scopus citations

    Abstract

    Many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects. We argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods. We show this bias can dominate the usual omitted variable bias using data on developerprovided open space. We control for multiscale capitalization and omitted variables simultaneously by extending the Hausman-Taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross-sectional unit through time.

    Original languageEnglish (US)
    Pages (from-to)1331-1342
    Number of pages12
    JournalReview of Economics and Statistics
    Volume93
    Issue number4
    DOIs
    StatePublished - Nov 1 2011

    ASJC Scopus subject areas

    • Social Sciences (miscellaneous)
    • Economics and Econometrics

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