Essays on the Use of Hedonic Price Models to Measure Welfare for Quality Changes in the Public Goods


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Virginia Tech


This dissertation consists of three essays on Hedonic price method which is widely used in non-market good evaluation. The first chapter outlines three topics involved and briefly discusses the motivations and methods, as well we some conclusions in each of the following chapters.

Chapter 2 uses a conventional first stage hedonic price method to estimate the effect of an aquatic invasive species (Eurasian watermilfoil) on lakefront property values at selected Vermont lakes. Results indicate that as the primary component of total aquatic macrophyte growth in a lake Eurasian watermilfoil significantly and substantially affects lakefront property values. As Eurasian watermilfoil infests a lake, adding to the total macrophyte growth, property values can diminish by <1% to 16% for incremental increases in the infestation level. Hence, policies that successfully prevent infestations have significant economic benefits to owners of lakefront properties and local communities.

Chapter 3 focused on a previously unexplored potential impact of 9/11—the impact it may have had on housing prices near mosques. Using a unique dataset that combines the locations of functioning mosques with housing transactions near the time of 9/11, combined with a generalized difference-in-differences framework, we find that housing prices decreased by approximately 7% ($10,559 for the average home) in areas near mosques along the east coast of the U.S. on average in the two years following the attacks. However, on the west coast we find no evidence that 9/11 caused a systematic decrease in housing prices near mosques.

Chapter 4 begins from a conventional model of hedonic equilibrium where a nonmarket amenity is conveyed as an attribute of a differentiated traded good. Different metropolitan areas may have different equilibrium price functions due to geographic variation in consumer preferences, income, and production costs. We demonstrate that under relatively mild restrictions on the geographic extent of taste-based sorting, indicator variables for metro areas define "imperfect instruments" that can be used to identify bounds on demand curves. Bounds on demand curves correspond to ranges of partial equilibrium welfare measures for non-marginal changes in environmental quality. We find these ranges to be informative in a preliminary application to evaluating the benefits of reducing cultural eutrophication of lakes in Maine, New Hampshire, and Vermont.

The last chapter concludes and discusses the insights for future research.



consumer surplus, hedonic price model, quasi-experiment, partial identification, imperfect instrument