Migration and hedonic valuation: The case of air quality

dc.contributor.author

Bayer, P

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Keohane, N

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Timmins, C

dc.date.accessioned

2010-03-09T15:41:35Z

dc.date.issued

2009-07-01

dc.description.abstract

Conventional hedonic techniques for estimating the value of local amenities rely on the assumption that households move freely among locations. We show that when moving is costly, the variation in housing prices and wages across locations may no longer reflect the value of differences in local amenities. We develop an alternative discrete-choice approach that models the household location decision directly, and we apply it to the case of air quality in US metro areas in 1990 and 2000. Because air pollution is likely to be correlated with unobservable local characteristics such as economic activity, we instrument for air quality using the contribution of distant sources to local pollution-excluding emissions from local sources, which are most likely to be correlated with local conditions. Our model yields an estimated elasticity of willingness to pay with respect to air quality of 0.34-0.42. These estimates imply that the median household would pay $149-$185 (in constant 1982-1984 dollars) for a one-unit reduction in average ambient concentrations of particulate matter. These estimates are three times greater than the marginal willingness to pay estimated by a conventional hedonic model using the same data. Our results are robust to a range of covariates, instrumenting strategies, and functional form assumptions. The findings also confirm the importance of instrumenting for local air pollution. © 2009 Elsevier Inc. All rights reserved.

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application/pdf

dc.identifier.eissn

1096-0449

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0095-0696

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https://hdl.handle.net/10161/2025

dc.language.iso

en_US

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Elsevier BV

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Journal of Environmental Economics and Management

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10.1016/j.jeem.2008.08.004

dc.title

Migration and hedonic valuation: The case of air quality

dc.type

Journal article

pubs.begin-page

1

pubs.end-page

14

pubs.issue

1

pubs.organisational-group

Duke

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Duke Population Research Center

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Duke Population Research Institute

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Economics

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Environmental Sciences and Policy

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Nicholas School of the Environment

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Sanford School of Public Policy

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Trinity College of Arts & Sciences

pubs.publication-status

Published

pubs.volume

58

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