Spatial Hedonics and the Willingness to Pay for Residential Amenities

Kenneth Small () and Seiji Steimetz ()
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Seiji Steimetz: Department of Economics, California State University-Long Beach

No 50631, Working Papers from University of California-Irvine, Department of Economics

Abstract: Housing rents may be influenced by characteristics of nearby properties, an effect captured by spatial autoregression in a hedonic rent equation. We investigate the implications of spatial autoregression for measuring the marginal welfare effects due to a change in a residential amenity such as air quality. We show that if spatial price interdependence arises from technological spillovers, such that utility depends directly on neighboring property values, then the welfare change is given by the reduced form of the autoregressive model, effectively applying a "spatial multiplier" to the relevant implicit price. If instead spatial interdependence arises from merely pecuniary spillovers, as is commonly supposed in motivating spatial autoregression, then no spatial multiplier on implicit prices is called for in computing welfare; but it is then especially important to use the autoregressive model to measure those implicit prices.

Keywords: Spatial autocorrelation; spatial lag; welfare; willingness to pay; hedonic price function (search for similar items in EconPapers)
JEL-codes: Q51 R21 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2006-06, Revised 2007-02
New Economics Papers: this item is included in nep-env, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: SPATIAL HEDONICS AND THE WILLINGNESS TO PAY FOR RESIDENTIAL AMENITIES (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:irv:wpaper:050631

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