A Rational Expectations Approach to Hedonic Price Regressions with Time-Varying Unobserved Product Attributes: The Price of Pollution

• 成果类型: Article
• 署名作者: Bajari, Patrick; Fruehwirth, Jane Cooley; Kim, Kyoo il; Timmins, Christopher
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; National Bureau of Economic Research; University of Cambridge; University of Cambridge; Duke University; National Bureau of Economic Research
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.102.5.1898
• 发表日期: 2012
• 页码: 1898-1926
• 关键词: air-pollution; CASE-CROSSOVER; matter; QUALITY; demand; MARKET; CHILDREN; asthma

摘要

We propose a new strategy for a pervasive problem in the hedonics literature: recovering hedonic prices in the presence of time-varying correlated unobservables. Our approach relies on an assumption about home buyer rationality, under which prior sales prices can be used to control for time-varying unobservable attributes of the house or neighborhood. Using housing transactions data from California's Bay Area between 1990 and 2006, we apply our estimator to recover marginal willingness to pay for reductions in three of the EPA's criteria air pollutants. Our findings suggest that ignoring bias from time- varying correlated unobservables considerably understates the benefits of a pollution reduction policy. (JEL D12, D84, Q53, Q58, R21)