Abstract
The hedonic model of Rosen (1974) has become a workhorse for valuing the characteristics of differentiated products despite a number of well-documented econometric problems, including a source of endogeneity that has proven difficult to overcome. Here we outline a simple, likelihood-based estimation approach for recovering the marginal willingness-to-pay function that avoids this endogeneity problem. Using this framework, we find that marginal willingness-to-pay to avoid violent crime increases by sixteen cents with each additional incident per 100,000 residents. Accounting for the slope of the marginal willingness-to-pay function has significant impacts on welfare analyses.
Original language | English (US) |
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Pages (from-to) | 66-83 |
Number of pages | 18 |
Journal | Journal of Urban Economics |
Volume | 109 |
DOIs | |
State | Published - Jan 1 2019 |
Keywords
- Crime
- Hedonic demand
- Willingness to pay
ASJC Scopus subject areas
- Economics and Econometrics
- Urban Studies