Confronting Price Endogeneity in a Duration Model of Residential Subdivision Development
| Autor: | Douglas H. Wrenn, H. Allen Klaiber, David A. Newburn |
|---|---|
| Rok vydání: | 2016 |
| Předmět: |
Economics and Econometrics
Land use business.industry Financial economics 05 social sciences Land conversion Spatial equilibrium Control function 0502 economics and business Economics Econometrics Endogeneity 050207 economics business health care economics and organizations Social Sciences (miscellaneous) 050205 econometrics Subdivision |
| Zdroj: | Journal of Applied Econometrics. 32:661-682 |
| ISSN: | 0883-7252 |
| DOI: | 10.1002/jae.2546 |
| Popis: | Summary Spatial equilibrium implies that distant factors are correlated with local prices through market mechanisms. Using this logic, we develop a novel approach for handling price endogeneity in land use models. We combine a control function approach with a duration model to identify the impact of prices in influencing land conversion. We find that failure to control for endogeneity results in large differences in elasticities. Specifically, we find an elasticity of 2.06 compared to 0.67 in a model without instrumentation. This difference is significant as it suggests that price-based policies, such as ‘green taxes’, are likely more effective in altering development patterns than would be expected from a naive estimation that ignores price endogeneity. Copyright © 2016 John Wiley & Sons, Ltd. |
| Databáze: | OpenAIRE |
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