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Title: Theoretically consistent temporal ordering specification in spatial hedonic pricing models applied to the valuation of aircraft noise
Authors: Thanos, Sotirios
Bristow, Abigail L.
Wardman, Mark
Keywords: Spatial econometrics
Spatial autocorrelation
Aircraft noise
Environmental valuation
Hedonic pricing
Time decay
Issue Date: 2012
Publisher: Routledge / Taylor & Francis (© 2012 eftec and Dr Kenneth Willis)
Citation: THANOS, S., BRISTOW, A.L. and WARDMAN, M., 2012. Theoretically consistent temporal ordering specification in spatial hedonic pricing models applied to the valuation of aircraft noise. Journal of Environmental Economics and Policy, 1 (2), pp.103-126.
Abstract: Incorporating spatial econometric tools in Hedonic Pricing (HP) models for environmental valuation has become the standard approach in the literature. The effect of house prices on other house prices is taken into account and usually measured by distance or contiguity in spatial weight matrices. Disaggregate house sale datasets are composed from observations each at a specific location and time. Nevertheless, the symmetric spatial weight matrices commonly employed in HP studies ignore the temporal dimension in disaggregate house sale data. Thus not only are previous house sales taken to affect subsequent house prices, but so do future house sales. However, information does not travel backwards in time; hence there is a clear theoretical impossibility of actual future prices affecting current/past prices. Estimates derived from HP models where spatial dependence is incorrectly specified or ignored will exhibit inaccuracies. This paper proposes an alternative specification of spatial weights in HP that includes spatial effects on each sale price only from preceding house sales. The temporal aspect of spatial effects is then developed further by specifying a time decay rate to capture the diminishing effect over time of preceding sale prices to succeeding house prices. This novel specification of spatial weight matrices is shown to have a significant effect on estimates of house price depreciation from aircraft noise. Monetary values of aircraft noise externality are successfully derived from the HP models for Athens Airport.
Description: This article is closed access until 6th December 2013. It is an Author's Accepted Manuscript of an article published in Journal of Environmental Economics and Policy [© Taylor & Francis], available online at: http://www.tandfonline.com/doi/abs/10.1080/21606544.2012.692862.
Version: Accepted for publication
DOI: 10.1080/21606544.2012.692862
URI: https://dspace.lboro.ac.uk/2134/11003
Publisher Link: http://www.tandfonline.com/doi/abs/10.1080/21606544.2012.692862
ISSN: 2160-6544
Appears in Collections:Closed Access (Architecture, Building and Civil Engineering)

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