The Value of Proximity to Water in Residential Areas

Tinbergen Institute Discussion Paper 14-047/VIII

25 Pages Posted: 23 Apr 2014

See all articles by Jan Rouwendal

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Ramona van Marwijk

Kadaster

Or Levkovich

VU University Amsterdam - Department of Spatial Economics

Date Written: April 22, 2014

Abstract

Proximity to water is appreciated by households. Hedonic analyses that try to measure the value of this amenity are potentially biased by omitted variables as locations close to the water may be selected by households with higher incomes who construct more luxury houses. Since it is difficult to observe all relevant characteristics, the coefficient for proximity to water may be biased upwards.

We circumvent this problem by exploiting a specific characteristic of the Dutch system of planned residential development: often a number of identical houses are constructed close to each other. By comparing the values of such identical houses, we can measure the effect of proximity to water under almost ideal circumstances. The results show a significant impact of this amenity, but of a smaller magnitude than was suggested by many earlier studies, thereby confirming the conjectured presence of omitted variable bias.

Keywords: hedonic analysis, local amenities, ommited variable bias

JEL Classification: D12, D61, R21

Suggested Citation

Rouwendal, Jan and van Marwijk, Ramona and Levkovich, Or, The Value of Proximity to Water in Residential Areas (April 22, 2014). Tinbergen Institute Discussion Paper 14-047/VIII, Available at SSRN: https://ssrn.com/abstract=2427687 or http://dx.doi.org/10.2139/ssrn.2427687

Jan Rouwendal (Contact Author)

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Ramona Van Marwijk

Kadaster ( email )

Netherlands

Or Levkovich

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

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