Provided by: National Bureau of Economic Research
Date Added: Mar 2006
Conventional hedonic techniques for estimating the value of local amenities rely on the assumption that households move freely among locations. The authors show that when moving is costly, the variation in housing prices and wages across locations may no longer reflect the value of differences in local amenities. They develop an alternative discrete-choice approach that models the household location decision directly, and they apply it to the case of air quality in U.S. metro areas in 1990 and 2000.