A Note on Hedonic Valuation of Urban Amenities Using Unbalanced Data

14 Pages Posted: 17 Sep 2007 Last revised: 4 Jan 2012

Valerie Mueller

International Food Policy Research Institute (IFPRI)

Glenn David Sheriff

National Center for Environmental Economics, US EPA

Date Written: September 15, 2008

Abstract

Hedonic valuation of urban amenities often requires estimating housing and labor market regressions. It is difficult to get both types of data for all survey respondents. We show that common practice of handling the unbalanced data by conducting two separate regressions can lead to inconsistent covariance matrix estimation and improper inference regarding confidence intervals for amenity values. We then demonstrate how two easily-implementable yet consistent techniques can be used for hedonic valuation with an application in valuing temperature increases in urban Brazil. All techniques estimate a net positive marginal value of a temperature increase. Unlike the separate equation estimation, however, techniques using a consistent covariance estimator are unable to reject at the 5 percent level the null hypothesis of a zero welfare effect.

Keywords: hedonic valuation, unbalanced data, seemingly unrelated regression

JEL Classification: C31, Q51

Suggested Citation

Mueller, Valerie and Sheriff, Glenn David, A Note on Hedonic Valuation of Urban Amenities Using Unbalanced Data (September 15, 2008). Available at SSRN: https://ssrn.com/abstract=1014416 or http://dx.doi.org/10.2139/ssrn.1014416

Valerie Mueller (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States

Glenn David Sheriff

National Center for Environmental Economics, US EPA ( email )

Washington, DC 20460
United States

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