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Hedonic Price Functions and Spatial Dependence: Implications for the Demand for Urban Air Quality

In: Advances in Spatial Econometrics

Author

Listed:
  • Kurt J. Beron

    (University of Texas at Dallas)

  • Yaw Hanson

    (Fannie Mae)

  • James C. Murdoch

    (University of Texas at Dallas)

  • Mark A. Thayer

    (San Diego State University)

Abstract

In 1967, Ronald Ridker and John Henning conducted the first study that linked air pollution to property values. Using census level data, they found that, for St. Louis, air pollution had a negative and significant affect on median housing prices. Research since has verified, modified, and redefined the economic interpretation of this relationship. In summarizing twenty-five years of property value/air pollution literature, Smith and Huang (1993, 1995) reported that approximately 74 percent of the studies found at least one significant air pollution variable. Even allowing for a publication bias toward significant findings, there seems to be a preponderance of evidence that air pollution is negatively related to housing prices. This is important because it reveals information about the willingness to pay for air quality — a nonmarket commodity. Moreover, to the extent that policymakers use the results from air pollution/property value studies, the findings are socially relevant. The South Coast Air Quality Management District, for example, uses a property value based model in formulating their Air Quality Management Plans.

Suggested Citation

  • Kurt J. Beron & Yaw Hanson & James C. Murdoch & Mark A. Thayer, 2004. "Hedonic Price Functions and Spatial Dependence: Implications for the Demand for Urban Air Quality," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax & Sergio J. Rey (ed.), Advances in Spatial Econometrics, chapter 12, pages 267-281, Springer.
    • Handle: RePEc:spr:adspcp:978-3-662-05617-2_12
    DOI: 10.1007/978-3-662-05617-2_12
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    Citations

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    Cited by:

    1. Luc Anselin & Julie Le Gallo, 2006. "Interpolation of Air Quality Measures in Hedonic House Price Models: Spatial Aspects This paper is part of a joint research effort with James Murdoch (University of Texas, Dallas) and Mark Thayer (San," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 31-52.
    2. Carriazo, Fernando & Ready, Richard & Shortle, James, 2013. "Using stochastic frontier models to mitigate omitted variable bias in hedonic pricing models: A case study for air quality in Bogotá, Colombia," Ecological Economics, Elsevier, vol. 91(C), pages 80-88.
    3. Kathleen P. Bell & Timothy J. Dalton, 2007. "Spatial Economic Analysis in Data‐Rich Environments," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 487-501, September.
    4. Jungik Kim & Peter Goldsmith, 2009. "A Spatial Hedonic Approach to Assess the Impact of Swine Production on Residential Property Values," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(4), pages 509-534, April.
    5. repec:asg:wpaper:1006 is not listed on IDEAS
    6. Simlai, Prodosh, 2014. "Estimation of variance of housing prices using spatial conditional heteroskedasticity (SARCH) model with an application to Boston housing price data," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 17-30.
    7. Shinichiro Iwata & Kazuto Sumita & Mieko Fujisawa, 2019. "Price competition in the spatial real estate market: allies or rivals?," Spatial Economic Analysis, Taylor & Francis Journals, vol. 14(2), pages 174-195, April.
    8. Anna Gloria Billé & Roberto Benedetti & Paolo Postiglione, 2017. "A two-step approach to account for unobserved spatial heterogeneity," Spatial Economic Analysis, Taylor & Francis Journals, vol. 12(4), pages 452-471, October.
    9. Julia Koschinsky & Nancy Lozano-Gracia & Gianfranco Piras, 2012. "The welfare benefit of a home’s location: an empirical comparison of spatial and non-spatial model estimates," Journal of Geographical Systems, Springer, vol. 14(3), pages 319-356, July.
    10. Nan Yang & Jill J. McCluskey & Michael P. Brady, 2012. "The Value of Good Neighbors: A Spatial Analysis of the California and Washington State Wine Industries," Land Economics, University of Wisconsin Press, vol. 88(4), pages 674-684.

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