Estimates of Households Preferences for Environmental Quality and Other Housing Characteristics From a System of Demand Equations

Abstract

Attempts to measure the willingness to pay for public goods, such as environmental quality, have relied largely on estimates derived directly from hedonic functions explaining property values despite recognized limitations. Here, hedonic prices are used to create a system of budget share (demand) equations for housing characteristics so that the demand for the environmental public commodity can be estimated within the housing budget constraint. Estimated expenditure, price and substitution elasticities are derived for both direct and indirect specifications. The assumptions of homotheticity and additivity of the underlying preferences are tested for and rejected.KeywordsPrice ElasticityHousing CharacteristicBudget ShareAircraft NoiseHedonic RegressionThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.