Demand for Environmental Quality: A Spatial Hedonic Analysis

49 Pages Posted: 22 May 2005

See all articles by Diane Hite

Diane Hite

Auburn University - Department of Agricultural Economics and Rural Sociology

David M. Brasington

University of Cincinnati - Department of Economics

Abstract

We first estimate the relationship between house prices and environmental disamenities using spatial statistics, confirming that nearby point-source pollutants depress house price. We then calculate implicit prices of environmental quality and related characteristics from the house price hedonics to estimate a demand curve for environmental quality, finding a price elasticity of demand of -0.12. We find evidence of significant spatial effects in both the hedonic and demand estimations. We find that environmental quality and school quality are purchased together (eta=-0.80), environmental quality and house size are substitutes (eta=0.91), and environmental quality and lot size are not related goods.

Keywords: Hedonic prices, spatial statistics, environmental disamenities, point-source pollution

JEL Classification: R22, H40, Q21, C14

Suggested Citation

Hite, Diane and Brasington, David M., Demand for Environmental Quality: A Spatial Hedonic Analysis. Available at SSRN: https://ssrn.com/abstract=491244

Diane Hite

Auburn University - Department of Agricultural Economics and Rural Sociology ( email )

Comer Hall
Auburn, AL 36849
United States
334-844-5655 (Phone)
334-844-5639 (Fax)

David M. Brasington (Contact Author)

University of Cincinnati - Department of Economics ( email )

Carl H. Lindner Hall 2925 Campus Green Drive
PO Box 0371
Cincinnati, OH 45221-0211
United States

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