Valuing Time-Varying Attributes Using the Hedonic Model: When Is a Dynamic Approach Necessary?

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

We build on the intuitive (static) modeling framework of Rosen (1974) and specify a simple, forward-looking model of location choice. We use this model, along with a series of graphs, to describe the potential biases associated with the static model and relate these biases to the time series of the amenity of interest. We then derive an adjustment factor that allows the potentially biased static estimates to be converted into forwardlooking estimates. Finally, we illustrate these concepts with two empirical applications: The marginal willingness to pay to avoid violent crime and the marginal willingness to pay to avoid air pollution.

Original languageEnglish (US)
Pages (from-to)134-145
Number of pages12
JournalReview of Economics and Statistics
Volume101
Issue number1
DOIs
StatePublished - Mar 1 2019

Fingerprint

willingness to pay
choice of location
violent crime
trend
air pollution
time series
time
Time-varying
Hedonic model
Willingness-to-pay
Factors
Forward-looking models
Amenities
Graph
Violent crime
Modeling
Air pollution
Location choice

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

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AB - We build on the intuitive (static) modeling framework of Rosen (1974) and specify a simple, forward-looking model of location choice. We use this model, along with a series of graphs, to describe the potential biases associated with the static model and relate these biases to the time series of the amenity of interest. We then derive an adjustment factor that allows the potentially biased static estimates to be converted into forwardlooking estimates. Finally, we illustrate these concepts with two empirical applications: The marginal willingness to pay to avoid violent crime and the marginal willingness to pay to avoid air pollution.

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