Monday, July 23, 2012

Professor Chris Timmins Master Class on Hedonic Valuation

Below is an outline of a master class that will take place in the University of Stirling on July 25th from 9am to 5pm. Enrolment is free. Travel costs will be covered for Scottish PhD students. People outside Scotland are welcome to attend. Please email me if you wish to attend this. The Professor giving the course is a leading expert in this area and I recommend this highly. 

Hedonics and Non-Market Valuation

Mini-Course Outline
Christopher Timmins
Duke University
Summer 2012

The purpose of this mini-course is to provide a graduate-level overview of hedonic analysis.  Hedonics are the primary revealed-preference tool for non-market valuation and cost-benefit analysis, and also play an important role in quality adjustment of price indices, and in modeling demand for differentiated products and their attributes.  The course will begin with a brief discussion of Rosen’s (1974) seminal paper and basic identification issues.  It will proceed with a discussion of the econometric problems associated with the recovery of the “willingness to pay” function, which is required for the valuation of non-marginal changes in amenities or product attributes.  We will then proceed to a discussion of omitted variables bias, and the quasi-experimental techniques that are used to address them.  The fourth part of the course will describe hedonic analysis when individuals sort over multiple (labor and housing) markets.  The fifth component will describe three areas of current research in hedonics.  The mini-course will then conclude with a short discussion of some of the weaknesses of the hedonic approach, motivating the use of structural sorting models.

The following syllabus describes the material covered in the mini-course in more detail.  Due to time constraints, not all of the listed papers will be covered.  Lecture notes will, however, be made available for (most) of the papers, whether they are presented or not.

(1)  Basic Theory and Identification (approx. ¾ hour)

Rosen (1974).  “Hedonic Prices and Implicit Markets: Product Differentiation in Perfect Competition.” Journal of Political Economy. 82(1):34-55.

Brown and Rosen (1982).  “On the Estimation of Structural Hedonic Price Models.”  Econometrica.  50(3):765-768.

Mendelsohn (1985).  “Identifying Structural Equations with Single Market Data.”  Review of Economics and Statistics. 67(3):525-529.

(2)  Recovering Willingness to Pay (approx.. 2 hours)

Epple (1987).  “Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products.”  Journal of Political Economy.  95(1):59-80.

Bartik (1987).  “Estimating Hedonic Demand Parameters with Single Market Data: The Problems Caused by Unobserved Tastes.”   Review of Economics and Statistics.  69(1):178-80.

Bartik (1987).  “The Estimation of Demand Parameters in Hedonic Price Models.”   Journal of Political Economy.  95(1):81-88.

Ekeland, Heckman, and Nesheim (2004).  “Identification and Estimation of Hedonic Models.”  Journal of Political Economy.  112(1.2):S60-S109.

Heckman, Matzkin, and Nesheim (2010).  “Nonparametric Identification and Estimation of Nonadditive Hedonic Models.”  Econometrica.  78(5):1569-1591.

Bajari and Benkard (2005).  “Demand Estimation With Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach.”  Journal of Political Economy.  113(6):1239-1276.

Bajari and Kahn (2005).  “Estimating Housing Demand With an Application to Explaining Racial Segregation in Cities.”  Journal of Business & Economic Statistics.  23(1):20-33.

Bishop and Timmins (2011).  “Hedonic Prices and Implicit Markets:  Estimating the Marginal Willingness to Pay for Large Reductions in Crime Without Instrumental Variables.”  Mimeo.

Griffith and Nesheim (2010).  “Estimating Households’ Willingness to Pay.  CeMMAP Working Paper CWP24/10.  Institute for Fiscal Studies, UCL.

(3)  Quasi-Experimental Techniques (approx. 2.5 hours)

Parmeter and Pope (2009).  “Quasi-Experiments and Hedonic Property Value Methods.”  Prepared for the Handbook on Experimental Economics and the Environment.  John List (ed).  Edward Elgar Publishers.

Palmquist (1984).  “Estimating the Demand for the Characteristics of Housing.”  Review of Economics and Statistics.  66(3):394-404.

Parsons (1992).  “The Effect of Coastal Land Use Restrictions on Housing Prices:  A Repeat Sales Analysis.”  Journal of Environmental Economics and Management.  22:25-37.

Chay and Greenstone (2005).  “Does Air Quality Matter?  Evidence from the Housing Market.”  Journal of Political Economy.  113(2):376-424.

Davis (2005).  “The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster.”  American Economic Review.  94(5):1693-1704.

Linden and Rockoff (2008).  “Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws.”  American Economic Review.  98(3):1103-1127.

Pope (2008). “Fear of Crime and Housing Prices:  Household Reactions to Sex Offender Registries.”  Journal of Urban Economics.  64(3):601-614.

Black (1999).  “Do Better Schools Matter?  Parental Valuation of Elementary Education.”  Quarterly Journal of Economics.  114(2):577-99.

Greenstone and Gallagher (2006).  “Does Hazardous Waste Matter?  Evidence From the Housing Market and the Superfund Program.”

Gamper-Rabindran and Timmins (2011).  “Does Cleanup of Hazardous Waste Sites Raise Housing Values?  Evidence of Spatially Localized Benefits.”  Mimeo.

Davis (2010).  “The Effects of Power Plants on Local Housing Values and Rents.”  Forthcoming in Review of Economics and Statistics.

(4)  Sorting Across Housing and Labor Markets:  Wage-Hedonics (approx. 1.5 hours)

Hoch and Drake (1974).  “Wages, Climate, and the Quality of Life.”  Journal of Environmental Economics and Management.  1(4):268-295.

     Rosen (1979).  “Wage-Based Indexes of Urban Quality of Life.”  In Current Issues in Urban Economics, edited by Peter Mieszhowski and Mahlen Straszheim.  Baltimore: Johns Hopkins University Press.

Roback (1982).  “Wages, Rents, and the Quality of Life.”   Journal of Political Economy.  90(6):1257-1278.

Roback (1988).  “Wages, Rents, and Amenities: Differences Among Workers and Regions.”  Economic Inquiry.  26:23-41.

Blomquist, Berger, and Hoehn (1988).  “New Estimates of Quality of Life in Urban Areas.”  American Economic Review.  78:89-107.

            Albouy (2008).  “Are Big Cities Really Bad Places to Live?  Improving Quality-of-Life     Estimates Across Cities.”  NBER Working Paper No. 14472.

Bayer, Khan, and Timmins (2011).  “Nonparametric Identification and Estimation in a Roy Model with Common Non-Pecuniary Returns.”  Journal of Business and Economic Statistics.  29(2):201-215.

(5)  Current Topics in Hedonics Research (approx. 2 hours)

Kuminoff and Pope (2010).  “Hedonic Equilibria, Land Value Capitalization, and the Willingness to Pay for Public Goods.”  Arizona State University Department of Economics Working Paper.

Bajari, Cooley, Kim and Timmins (2010).  “A Theory-Based Approach to Hedonic Price Regressions with Time-Varying Unobserved Product Attributes: The Price of Pollution.”  Forthcoming, American Economic Review.

Bishop and Murphy (2012).  "Incorporating Dynamic Behavior into the Hedonic Model."  Working Paper, Olin School of Business, Washington University in St. Louis.

(6)  Weaknesses of the Hedonic Framework / Sorting Model Motivation (approx. ¼ hour)

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