Estimation of nonlinear functions using coarsely discrete measures in panel data: The relationship between land prices and earthquake risk in the Tokyo Metropolitan District

Tao Gu, Masayuki Nakagawa, Makoto Saito and Hisaki Yamaga

No 729, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper proposes a simple method to estimate a nonlinear function using only coarsely discrete explanatory variables in panel data. The basic premise is to distinguish carefully between two types of discrete variables by assuming that if the variable changes between two points in time, it increases (decreases) marginally from near the upper (lower) bound one rank below (above). The dynamic pricing behavior at the boundary between two consecutive ranks is then properly approximated. Applying the proposed method, we estimate the nonlinear relationship between land prices and earthquake risk, with the latter being assessed over only five ranks. The panel datasets used comprise some two thousand fixed places over time in the Tokyo Metropolitan District. We interpret the estimated nonlinear land pricing functions using prospect theory from behavioral economics.

JEL-codes: D91 R14 R30 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2021-12
New Economics Papers: this item is included in nep-ecm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/72533/DP729.pdf
Our link check indicates that this URL is bad, the error code is: 503 Service Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:729

Access Statistics for this paper

More papers in Discussion Paper Series from Institute of Economic Research, Hitotsubashi University Contact information at EDIRC.
Bibliographic data for series maintained by Hiromichi Miyake ().