PhD defence: Valuing the world outside your doorstep
Title of thesis
Valuing the world outside your doorstep. Hedonic studies of neighbourhood amenities
A core field of environmental economics is the valuation of goods for which there does not exist a market in the traditional sense. In this thesis, I investigate flood risk, forest and industrial heritage. Things, which can give us either discomfort or wellbeing, but does not have a market price. In a society which constantly have to prioritize how to allocate the public budget, ignorance about the value of these non-marketed goods can result in too little of the positive amenities being provided and too much of the negative. When we know more about the demand for forest or the costs of flood risk, we can take appropriate action to make society better of either through regulation or public supply. One way to estimate the value is by looking at a market where people implicitly buy the non-marketed goods. One example is that people reveal their preference for nearness to nature, when they chose where to live as they priorities nature relative to other housing characteristics. In this thesis, I use the market for land and houses to reveal peoples preferences with Hedonic Pricing Models. Standing on the shoulders of more than 45 years of research, I apply the method with modern techniques and theory to provide knowledge about the welfare implications of changes in environmental aspects, which will likely become even more widespread in the coming years.
The four papers in this thesis contribute to the literature in different ways. The objective of the first paper is to estimate the amenity component of forest value for owners of mixed agricultural properties. Forests provide numerous ecosystem services, marketed as well as non-marketed. We hypothesize that especially for owners of smaller plots of land, the amenity value contribute with a large share of the total value. By combining the outcome of a hedonic land price model with data from cash flow models for timber and capitalized accounting data for forest income, we find that forest owners do seem to have a value above what we can attribute to the timber value. We add to the existing literature with our study of mixed agricultural and forest properties, many of them small-scale farmers, with our focus on on-farm i.e. private amenities and by combining revealed preference methods with production data.
In the second paper, we investigate the impact on different sources of flood risk information on house prices. We use a quasi-experimental approach where we compare the development in house prices of flooded houses with the development in prices for non-flooded houses. Assuming that without the flood, the two groups of houses would have continued on a similar trend, we can isolate the effect of the flood. We find that only the flood event itself reduces the house price significantly, compared to non-flooded houses. Neither the publication of flood maps nor increased media attention to flooding can be detected in the house prices. Other studies of flood and flood risk have estimated the capitalized effect on house prices, whereas we take advantage of recent developments in the welfare economic theory in relation to quasi-experimental literature and interpret the price change as a welfare loss.
Rather than looking at an environmental attribute, the third paper investigates the indirect effect of revitalizing an old industrial heritage site. All cultural heritage sites are unique, which makes external validation hard. We contribute to the literature by looking into a project that does not only remove a negative externality, but also create a new public good, rather than apartments. Further, we go beyond estimating the capitalized effect and elicit the welfare effect of the project despite the long study period. We find an aggregated welfare gain for households in the neighborhood around the site on 51 to 90 million EUR.
The objective in the fourth paper is to investigate the demand for forest as a public good. We estimate the willingness to pay for an extra hectare of forest within one kilometer from the houses in the study areas. Forest is a heterogeneous good and forest quality depends on many different, often correlated variables. We control for the quality of the nearest forest with forest fixed effects. Next, we estimate a demand function based on the willingness to pay for forest area from different market. This enable us to calculate the welfare outcome for larger changes in forest area. We find that people in general have a positive willingness to pay for forest, but it decreases, as the forest area increases. We contribute to the sparse literature on demand for forest and implement new ways to solve classic estimation problems.
Professor Jette Bredahl Jacobsen, Department of Food and Resource Economics (IFRO), University of Copenhagen
Senior Researcher Toke Emil Panduro, Aarhus University
Associate Professor Thomas Hedemark Lundhede, Department of Food and Resource Economics
Professor Brett Day, University of Exeter
Professor Ståle Navrud, Norwegian School of Life Sciences
Master of Ceremony
Professor Søren Bøye Olsen, Department of Food and Resource Economics, University of Copenhagen
Place: "Von Langen", Rolighedsvej 23, 1958 Frederiksberg C.
Link for hybrid Zoom participation: https://ucph-ku.zoom.us/j/69846291657?pwd=R2JNZGhmeGcweGlETnJVanVzbW9tQT09
Meeting ID: 698 4629 1657
The defence is open to all.
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