Using Frontier Models to Mitigate Omitted Variable Bias in Hedonic Pricing Models: A Case Study for Air Quality in Bogotá, Colombia

Fernando Carriazo (), Richard Ready and James Shortle

No 8736, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: Hedonic pricing models use property value differentials to value changes in environmental quality. If unmeasured quality attributes of residential properties are correlated with an environmental quality measure of interest, conventional methods for estimating implicit prices will be biased. Because many unmeasured quality measures tend to be asymmetrically distributed across properties, it may be possible to mitigate this bias by estimating a heteroskedastic frontier regression model. This approach is demonstrated for a hedonic price function that values air quality in Bogotá, Colombia.

Keywords: hedonic pricing model; omitted variables; air quality; frontier model (search for similar items in EconPapers)
JEL-codes: Q51 Q53 (search for similar items in EconPapers)
Pages: 32
Date: 2011-03-20
New Economics Papers: this item is included in nep-agr, nep-env and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:008736

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