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The Role of Information in the Rosen-Roback Framework

Author

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  • Xuwen Gao
  • Ran Song
  • Christopher Timmins

Abstract

In this paper, we study the role of information in non-market valuation. We develop a variant of the Rosen-Roback model of inter-urban sorting that incorporates public access to information about air quality, and demonstrate that information constraints create a wedge between the revealed and true hedonic prices. Moreover, the direction and the magnitude of that wedge depends on the individual’s perception bias. We empirically test our theoretical predictions by leveraging a natural experiment – the unexpected disclosure of PM2.5 data in China. We find that perception bias before the data disclosure leads to a downward estimation bias in hedonic valuation. The hedonic price of avoiding PM2.5 exposure increases substantially from 171 to 336 Chinese Yuan in response to the information shock. Our work sheds light on the application of Rosen-Roback theory for non-market valuation in countries where the public access to information is restricted.

Suggested Citation

  • Xuwen Gao & Ran Song & Christopher Timmins, 2021. "The Role of Information in the Rosen-Roback Framework," NBER Working Papers 28943, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28943
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    Cited by:

    1. Mingying Zhu & Anthony Heyes, 2024. "Dreaming of Blue Skies: Evidence on Air Pollution and the Mobility Aspirations of Young People in Beijing from Online Search Behavior," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(11), pages 2889-2933, November.

    More about this item

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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