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Estimating Households’ Preferences for Environmental Amenities Using Equilibrium Models of Local Jurisdictions

JunJie Wu and Seong-Hoon Cho ()

Scottish Journal of Political Economy, 2003, vol. 50, issue 2, 189-206

Abstract: Much research has focused on the development of equilibrium models of local jurisdictions to analyze the formation of social structures and community characteristics. These models, however, have been subjected to little empirical testing. In a recent paper, Epple and Sieg (1999) developed a new method for estimating equilibrium models of local jurisdictions, but they did not include environmental amenities in their empirical application. In this paper, we extend and apply this new method to estimate households’ preferences for alternative environmental amenities in the Portland Oregon metropolitan area. We show that estimated structural parameters would be biased if environmental amenities are ignored. By including amenities into the structural models of local jurisdictions, households’ preferences for alternative environmental amenities and public goods are estimated. Parameter values underlying households’ residential choices are uncovered. Many of the empirical regularities observed in the data are replicated (JEL R1, R2, Q2).

Date: 2003
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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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Handle: RePEc:bla:scotjp:v:50:y:2003:i:2:p:189-206