Does the Measurement of Property and Structural Characteristics Affect Estimated Implicit Prices for Environmental Amenities in a Hedonic Model?

Posted: 28 May 2002

See all articles by Kevin J. Boyle

Kevin J. Boyle

University of Maine

Laura O. Taylor

Georgia State University - Department of Economics

Abstract

Hedonic models are commonly used to estimate marginal willingness pay for environmental amenities. These studies utilize variables that are assumed to be measured without error, such as the square footage of the lot or the number of bedrooms, and proxy variables such as neighborhood or school quality. Lot and structural characteristics may in fact be measured with error. Potential sources of error include inaccurate measures and inconsistent updating. We investigate the effect of using tax-assessor data versus survey data from purchasers to estimate the implicit price of an environmental amenity, like-water clarity. Convergent validity of the implicit price for water clarity is established if the town and survey data provide statistically indistinguishable estimates of implicit prices for this amenity. Overall, the town-office and survey data on property characteristics were not statistically different in three of the four market groupings examined, which suggests that the traditional municipal sources of these data may not contain substantial measurement error. Furthermore, convergent validity is satisfied in all four, market areas. However, differences in computed implicit prices of clarity in two of the market areas are large enough that policy decisions for environmental quality could be affected by the source of the lot and structural data.

Keywords: hedonics, measurement error, environmental amenities, water clarity

Suggested Citation

Boyle, Kevin J. and Taylor, Laura O., Does the Measurement of Property and Structural Characteristics Affect Estimated Implicit Prices for Environmental Amenities in a Hedonic Model?. Available at SSRN: https://ssrn.com/abstract=304063

Kevin J. Boyle (Contact Author)

University of Maine ( email )

Orono, ME 04469-5774
United States

Laura O. Taylor

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

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