On the issue of functional form choice in hedonic price functions: Further evidence.
Abstract
Abstract
Historically, researchers applying the hedonic technique devoted little effort to testing alternative functional forms. This study used Box-Cox transformations on a hedonic model examining property value effects of a closed landfill to help select among alternative functional forms. Although this particular application found that a log-log functional form was appropriate, it appears that functional form may vary by problem and case study area selected. Benefit estimates generated using the hedonic technique may be substantial over- or underestimates if the incorrect functional form is chosen. Proximity to the landfill had no significant effect on properly values.
Historically, researchers applying the hedonic technique devoted little effort to testing alternative functional forms. This study used Box-Cox transformations on a hedonic model examining property value effects of a closed landfill to help select among alternative functional forms. Although this particular application found that a log-log functional form was appropriate, it appears that functional form may vary by problem and case study area selected. Benefit estimates generated using the hedonic technique may be substantial over- or underestimates if the incorrect functional form is chosen. Proximity to the landfill had no significant effect on property values.
Department
Natural Resources and the Environment
Publication Date
9-1997
Journal Title
Environmental Management
Publisher
Springer
Digital Object Identifier (DOI)
10.1007/s002679900065
Document Type
Article
Recommended Citation
Halstead, J.M., Bouvier, R.A., Hansen, B.E. On the issue of functional form choice in hedonic price functions: Further evidence. (1997) Environmental Management, 21 (5), pp. 759-765.