Estimating the willingness to pay for urban esthetic projects using an inter-temporal equilibrium: a difference-in-differences hedonic approach

Kono, Tatsuhito and Sega, Kousuke and Seya, Hajime (2020): Estimating the willingness to pay for urban esthetic projects using an inter-temporal equilibrium: a difference-in-differences hedonic approach.

Abstract

Based on an inter-temporal general equilibrium model, we rigorously derive a measurement method using dynamic changes in cross-sectional hedonic prices to estimate the willingness to pay for urban esthetic projects. The method has advantages in common with a difference-in-differences approach. For example, fewer attributes are used as explanatory variables than with a cross-sectional hedonic approach because fixed effects can be ignored. It can therefore mitigate problems related to omitted variables and multicollinearity, which are prevalent in cross-sectional hedonic approaches. Nevertheless, either the measurement or one additional assumption of marginal utility of income is necessary for provision of correct measures. In addition, we consider the existence of condominiums, which has not been supposed in conventional hedonic approaches but must always be considered in practical situations. We apply the method to utility line undergrounding projects.

• Item Type: MPRA Paper
• Language: English
• Keywords: project evaluation, amenities, willingness to pay, dynamic hedonic approach, difference in differences
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R14 - Land Use Patterns; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R52 - Land Use and Other Regulations

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