Can proximity to urban green spaces be considered a luxury? Classifying a non-tradable good with the use of hedonic pricing method

Abstract

Environmental goods are sometimes considered a luxury that only the rich can afford. This is no less true in the case of green spaces. However, a typical microeconomic lens is not relevant to study the potential luxury of non-tradable goods. Typically, the distributional interpretation of the income elasticity of the willingness to pay (WTP) for such goods would involve stated preferences valuation methods. The possibility to describe the luxury of green space proximity based on revealed preferences methods has not been evaluated yet. Through this study, we would like to fill this gap. We proposed a three-step analysis of the apartment market in Lodz (Poland), based on the hedonic pricing method, to check how the marginal WTP (MWTP) for proximity to parks/forests differs among apartment price sub-segments. We discuss whether and to what extent the variability of the MWTP could be linked with the presumed luxury of green space proximity. We found that proximity does not result in increased apartment prices for all parks and forests. The estimated MWTP for the proximity to selected parks rises in consecutive apartment price sub-segments. This could be interpreted as a sign of the luxury of living close to these parks by apartment buyers.