Assessing Regional Quality of Life: A Call for Action in Regional Science

Rickman, Dan S. (2014): Assessing Regional Quality of Life: A Call for Action in Regional Science.

Abstract

Intellectual appeal and simplicity of use has led to the widespread application of the spatial hedonic model in assessing regional quality of life. Yet, the traditional spatial hedonic approach contains numerous assumptions, which typically are untested. Violation of the assumptions in practice can lead to significantly biased estimates of regional quality of life. More sophisticated econometric approaches have been developed to reduce the biases. However, each approach typically only addresses one or two of the concerns. More promising, is the use of structural models, which by design have the potential to overcome all the limitations of the spatial hedonic approach.

• Item Type: MPRA Paper
• Language: English
• Keywords: Hedonic estimation; Spatial equilibrium; Quality of life
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

References

Albouy, David. (2008) “Are Big Cities Really Bad Places to Live? Improving Quality-of-Life Estimates across Cities,” NBER Working Paper Series, Working Paper 14472.

Bayer, Patrick, Nathaniel O. Keohane and Christopher Timmins. (2009) “Migration and Hedonic Valuation: The Case of Air Quality,” Journal of Environmental Economics and Management, 58, 1-14.

Beeson, Patricia E. and Randall W. Eberts. (1989) “Identifying Productivity and Amenity Effects in Interurban Wage Differentials,” The Review of Economics and Statistics, 71(3), 443-452.

Behrens, Kristian, Giordano Mion, Yasusada Murata and Jens Südekum. (2012) “Spatial Frictions,” http://erwan.marginalq.com/HULM11f/kb.pdf‎.

Berger, Mark C., Glenn C. Blomquist, and Klara Sabirianova Peter. (2008) “Compensating Differentials in Emerging Labor and Housing Markets: Estimates of Quality of Life in Russia Cities,” Journal of Urban Economics, 63(1), 25-55.

Blomquist, Glenn C., Mark C. Berger, and John P. Hoehn. (1988) “New Estimates of Quality of Life in Urban Areas,” American Economic Review, 78(1), 89-107.

Brambilla, Marco, Alessandra Michelangeli and Eugenio Peluso. (2013) “Equity in the City: On Measuring Urban (Ine)quality of Life,” Urban Studies, 50(16), 3205-3224.

Buettner, Thiess and Alexander Ebertz. (2009) “Quality of Life in the Regions: Results for German Counties,” Annals of Regional Science, 43(1), 89-112.

Bustic, Van, Ellen Hanak, Robert G.Valletta. (2011) “Climate Change and Housing Prices: Hedonic Estimates for Ski Resorts in Western North America,” Land Economics, 87(1), 75-91.

Chen, Yong and Stuart S. Rosenthal. (2008) “Local Amenities and Life-Cycle Migration: Do People Move for Jobs or Fun?” Journal of Urban Economics, 64, 519-537.

Clark David E., William E. Herrin, Thomas A. Knapp and Nancy E.White. (2003) “Migration and Implicit Amenity Markets: Does Incomplete Compensation Matter?” Journal of Economic Geography, 3, 289-307.

Daniel, Vanessa E., Raymond J.G.M. Florax and Piet Rietveld. (2009) “Flooding Risk and Housing Values: An Economic Assessment of Environmental Hazard,” Ecological Economics, 69(2), 355-365.

Desmet, Klaus and Esteban Rossi-Hansberg. (2013) “Urban Accounting and Welfare,” American Economic Review, 103(6), 2296-2327.

DuMond, J. Michael, Barry T. Hirsch and David A.Macpherson. (1999) “Wage Differentials across Labor Markets and Workers: Does Cost of Living Matter?” Economic Inquiry 37(4), 577–598.

Gabriel, Stuart A., Joe P. Mattey and William L.Washer. (2003) “Compensating Differentials and Evolution in the Quality-of-Life among U.S. States,” Regional Science and Urban Economics, 33(5), 619-649.

Gabriel, Stuart A. and Stuart S. Rosenthal. (2004) “Quality of the Business Environment versus Quality of Life: Do Firms and Households Like the Same Cities? The Review of Economics and Statistics, 86(1), 438-44.

Glaeser Edward L. and Joshua D. Gottlieb. (2008) “The Economics of Place-Making Policies,” Brookings Papers on Economic Activity, (Spring), 155-239.

Glaeser, Edward L., Joseph Gyourko and Albert Saiz. (2008) “Housing Supply and Housing Bubbles,” Journal of Urban Economics, 64(2), 198-217.

Gopalakrishnan, Sathya, Martin D. Smith, Jordan M.Slott and A. Brad Murray. (2011) “The Value of Disappearing Beaches: A Hedonic Pricing Model with Endogenous Beach Width,” Journal of Environmental Economics and Management, 61(3), 297-310.

Greenwood, Michael J., Gary L. Hunt, Dan S. Rickman and George I. Treyz. (1991) “Migration, Regional Equilibrium, and the Estimation of Compensating Differentials,” American Economic Review, 81, 1382-1390.

Gyourko, Joseph and Joseph Tracy. (1991) “The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, 99(4), 774-806.

Gyourko, Joseph, Christopher Mayer and Todd Sinai. (2013) “Superstar Cities,” American Economic Journal: Economic Policy, 5(4), 167-99.

Krupka, Douglas J. and Kwame N. Donaldson. (2013) “Wages, Rents and Heterogeneous Moving Costs,” Economic Inquiry, 51(1), 844-864.

Larson, Elisabeth K. and Charles Perrings. (2013) “The Value of Water-Related Amenities in an Arid City: The Case of the Phoenix Metropolitan Area,” Landscape and Urban Planning, 109(1), 45-55.

Lee, Sanghoon. (2010) “Ability Sorting and Consumer City,” Journal of Urban Economics, 68, 20-33.

Luechinger, Simon. (2009) “Valuing Air Quality using the Life Satisfaction Approach,” The Economic Journal, 119, 482-515.

Maddison, David J. and Andrea Bigano. (2003) “The Amenity Value of the Italian Climate,” Journal of Environmental Economics and Management, 45(2), 319-332.

Moretti, Enrico. (2013) “Real Wage Inequality,” American Economic Journal: Applied Economics, 5(1), 65-103.

Mueller, Julie, John Loomis and Armondo Gonzalez-Caban. 2009 “Do Repeated Wildfires Change Homebuyers' Demand for Homes in High-Risk Areas? A Hedonic Analysis of the Short and Long-Term Effects of Repeated Wildfires on House Prices in Southern California,” Journal of Real Estate Finance and Economics, 38(2), 155-172.

Oswald Andrew J. and Stephen Wu. (2011) “Well-Being across America,” The Review of Economics and Statistics, 93(4), 1118-1134.

Paciorek, Andrew. (2013) “Supply Constraints and Housing Market Dynamics,” Journal of Urban Economics, 77, 11-26.

Partridge, Mark D. and Dan S. Rickman. (1998) “Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal,” International Regional Science Review, 21(3), 205-248.

_____. (2003) “The Waxing and Waning of Regional Economies: The Chicken-Egg Question of Jobs vs. People,” Journal of Urban Economics, 53, 76-97.

_____. (2006) “An SVAR Model of Fluctuations in U.S. Migration Flows and State Labor Market Dynamics,” Southern Economic Journal, 72(4), 958-980.

_____. (2009) “Canadian Regional Labour Market Evolutions: A Long-Run Restrictions SVAR Analysis,” Applied Economics, 41(13-15), 1855-1871.

_____. (2010) "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, 44(10), 1311-1328.

Partridge, Mark D., Dan S. Rickman, M. Rose Olfert and Ying Tan. (Forthcoming) “When Spatial Equilibrium Fails: Is Place-Based Policy Second Best?” Regional Studies, DOI: 10.1080/00343404.2013.837999.

Rappaport, Jordan. (2008) “Consumption Amenities and City Population Density,” Regional Science and Urban Economics, 38(6), 533-552.

_____. (2009) “The Increasing Importance of Quality of Life," Journal of Economic Geography, 9(6), 779-804.

Rehdanz, Katrin. (2006) “Hedonic Pricing of Climate Change Impacts to Households in Great Britain,” Climatic Change, 74(4), 413-434.

Rehdanz, Katrin and David J. Maddison. (2009) “The Amenity Value of Climate to Households in Germany,” Oxford Economic Papers-New Series, 61(1), 150-167.

Rickman, Dan S. (2010) “Modern Macroeconomics and Regional Economic Modeling,” Journal of Regional Science, 50(1), 23-41.

Rickman, Dan S. and Shane D. Rickman. (2011) “Population Growth in High-Amenity Nonmetropolitan Areas: What’s the Prognosis?” Journal of Regional Science, 51(5), 863-879.

Roback, Jennifer. (1982) “Wages, Rents, and the Quality of Life,” Journal of Political Economy, 90(6), 1257-78.

_____. (1988) “Wages, Rents, and Amenities: Differences among Workers and Regions,” Economic Inquiry, 26(1), 23-41.

Rosen, Sherwin. (1974) “Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition,” Journal of Political Economy, 82(1), 34-55.

Stoddard, Christiana. (2005) “Adjusting Teacher Salaries for the Cost of Living: The Effect on Salary Comparisons and Policy Conclusions,” Economics of Education Review, 24(3), 323-39.

Timmins, Christopher. (2007) “If You Cannot Take the Heat Get Out of Cerrado…Recovering the Equilibrium Amenity Cost of Nonmarginal Climate Change in Brazil,” Journal of Regional Science, 47(1), 1-25.

Veronesi, Marcella, Fabienne Chawla, Max Maurer and Judit Lienert. (2014) “Climate Change and the Willingness to Pay to Reduce Ecological and Health Risks from Wastewater Flooding in Urban Centers and the Environment,” Ecological Economics, 98, 1-10.

Winters, John V. (2009) “Wages and Prices: Are Workers Fully Compensated for Cost of Living Differences?” Regional Science and Urban Economics, 39, 632-643.

Yoon, Chamna. (2012) “The Decline of the Rustbelt: A Dynamic Spatial Equilibrium Analysis,” http://economics.sas.upenn.edu/system/files/DRB.pdf‎.

Zheng, Siqi Q., Yuming Fu, and Hongyu Liu. (2009) “Demand for Urban Quality of Living in China: Evolution in Compensating Land-Rent and Wage-Rate Differentials,” Journal of Real Estate Finance and Economics, 38(3), 194-213.

Zheng, Siqi Q., Matthew E. Kahn and Hongyu Liu. (2010) “Towards a System of Open Cities in China: Home Prices, FDI Flows and Air Quality in 35 Major Cities,” Regional Science and Urban Economics, 40(1), 1-10.

Zheng, Siqi Q., Jing Cao, Matthew E. Kahn and Cong Sun. (2014) “Real Estate Valuation and Cross-Boundary Air Pollution Externalities: Evidence from Chinese Cities,” The Journal of Real Estate Finance and Economics, 48(3), 398-414.