The Economic Valuation of the Environment and Public Policy: A Hedonic Approach

186 Pages·2003·5.27 MB·English

by  Noboru Hidano

The Economic Valuation of the
Environment and Public Policy
NEW HORIZONS IN ENVIRONMENTAL ECONOMICS
Series Editors:Wallace E.Oates,Professor ofEconomics,University ofMaryland,USA and Henk
Folmer,Professor ofGeneral Economics,Wageningen University and Professor ofEnvironmental
Economics,Tilburg University,The Netherlands
This important series is designed to make a significant contribution to the development ofthe prin-
ciples and practices ofenvironmental economics.It includes both theoretical and empirical work.
International in scope,it addresses issues ofcurrent and future concern in both East and West and
in developed and developing countries.
The main purpose ofthe series is to create a forum for the publication ofhigh quality work and
to show how economic analysis can make a contribution to understanding and resolving the envi-
ronmental problems confronting the world in the twenty-first century.
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The Economic Valuation ofthe Environment and Public Policy
A Hedonic Approach
Noboru Hidano
The Economic
Valuation of the
Environment and
Public Policy
A Hedonic Approach
Noboru Hidano
Professor,Department of Social Engineering,Tokyo Institute
of Technology,Japan
NEWHORIZONS IN ENVIRONMENTAL ECONOMICS
Edward Elgar
Cheltenham,UK • Northampton,MA,USA
© Noboru Hidano,2002
All rights reserved.No part of this publication may be reproduced,stored
in a retrieval system or transmitted in any form or by any means,electronic,
mechanical or photocopying,recording,or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
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Montpellier Parade
Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing,Inc.
136 West Street
Suite 202
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library ofCongress Cataloguing in Publication Data
Hidano,Noboru,1949–
The economic valuation of the environment and public policy:a
hedonic approach / Noboru Hidano.
p.cm.— (New horizons in environmental economics)
Includes bibliographical references and index.
1.Environmental economics.2.Hedonism.3.Environmental policy.
I.Title.II.Series.
HD75.6.H53 2003
333.7—dc21 2002029827
ISBN1 84376 168 8
Printed and bound in Great Britain by Biddles Ltd,www.biddles.co.uk
Contents
List of figures ix
List of tables xi
Preface xiii
1 Introduction 1
2 The hedonic approach 9
Development of the hedonic conception 9
Rosen’s method and work in the 1970s 10
Econometrics after the 1980s 13
Scotchmer’s crucial comments 15
Reconsideration of capitalization theory 16
3 Theory of capitalization hypothesis 18
Two types of capitalization 18
Theory of cross-sectional capitalization 21
Extension 27
Conclusion 28
4 Hedonic measure as an approximation of benefit 29
Introduction 29
Examination of overestimation ratio 29
Results 31
An extension:CES functions 33
5 Empirical examination of the accuracy of the hedonic
measure 37
Large national project evaluation 37
Introduction of accessibility and the model revised 37
Parameter estimation method and data 39
Results 42
Conclusion 44
6 Comparison with contingent valuation method 45
Meaning of comparison 45
Air pollution 46
v
vi Contents
Water Environment 47
Conclusion 49
7 Estimation of hedonic price function 51
Introduction 51
Market segmentation and sample size for hedonic
analysis 51
Types of property data 52
Explanatory characteristics of a property 61
Making variables fit the reality 63
Hedonic price function and unit and form of variables 68
8 Hedonic price method in estimating the value of
environment and institutional regulation 71
Introduction 71
Changes in consumer preference on an upper-class
housing estate in Tokyo,1934 and 1985 71
Amenity value 74
Environmental cost 87
Value of institutional measures:The regulation on
floor to land area ratio in the CBD 95
Characteristics of the values of the environment and
public services 96
Concluding remark 101
9 Environmental cost–benefit analysis using the hedonic
price method 102
Introduction 102
Basic principles of cost–benefit analysis 102
Procedure 111
A numerical example 117
Conclusions 123
10 Concluding remarks 125
Appendix 1 Proof of time-series capitalization 127
Appendix 2 Proof of the overestimation theorem 130
Appendix 3 Proof of equality conditions 134
Appendix 4 Model and proof of the overestimation theorem
inthe case of heterogeneous consumers 139
Appendix 5 Short-run case 141
Appendix 6 Two-region general equilibrium model 144
Contents vii
Appendix 7 Two-region two type of consumer general
equilibrium model 147
Appendix 8 Schedule of benefits and costs 150
Notation 151
Bibliography 154
Index 163

Figures
2.1 Hedonic price function and bid price function 11
7.1 Land price map in Tokyo Metropolis 56
8.1 Cost of flood risk 76
8.2 Externality of neighbourhood amenity 80
8.3 Marginal value of green environment 86
8.4 Marginal negative value of façade 86
8.5 Marginal cost of noise 90
9.1 Equivalent and compensating variation,and
equivalentandcompensating surplus 106
9.2 Barato River and Sapporo City,Japan 118
ix