Jaren C. Pope

Do Seller Disclosures Affect Property Values? Buyer Information and the Hedonic Model

The hedonic method is widely used to infer the value of environmental amenities that are bundled with real property. The interpretation of hedonic prices as marginal values requires that households are “fully informed.”Yet, there is evidence that buyers are often less informed than sellers. A graphical illustration in this study suggests that asymmetric information between buyers and sellers can affect hedonic prices. This intuition is confirmed by a quasi-random experiment that exploits spatial and information discontinuities stemming from a seller disclosure for flood zones. Results suggest a 4% decline in housing prices in flood zones after disclosures commenced. (JEL Q51, R52)

Quasi-Experiments and Hedonic Property Value Methods

There has recently been a dramatic increase in the number of papers that have combined quasi-experimental methods with hedonic property models. This is largely due to the concern that cross-sectional hedonic methods may be severely biased by omitted variables. While the empirical literature has developed extensively, there has not been a consistent treatment of the theory and methods of combining hedonic property models with quasi-experiments. The purpose of this chapter is to fill this void. An effort is made to provide background information on the traditional hedonic theory, the traditional cross-sectional hedonic methods as well as the newer quasi-experimental hedonic methods that use program evaluation techniques. By connecting these two literatures, the underlying theoretical and empirical assumptions necessary to derive welfare measures or capitalization rates become more apparent. The chapter also provides a practical how to guide on implementing a quasi-experimental hedonic analysis. This is done by focusing on a series of steps that can help to ensure the reliability of a quasi-experimental identification strategy. We illustrate this process using several recent papers from the literature.

Integrating Property Value and Local Recreation Models to Value Ecosystem Services in Urban Watersheds

This paper outlines a new revealed preference method to estimate the effects of changes in land use associated with residential development on water quality and the implied ecosystem services at the watershed level. The analysis integrates data describing several types of behavior and uses hedonic property value and random utility models for local recreation to consider the multiple impacts of ecosystem services on household well-being. Several policy examples drawn from changes in Wake County, North Carolina, are used to demonstrate how spatial differences in residential development are reflected in the model’s estimates of the economic costs of deterioration in watershed quality. (JEL Q51, Q57)

Understanding College Application Decisions: Why College Sports Success Matters

Using a unique, national data set that indicates where students choose to send their SAT scores, the authors find that college sports success has a large impact on student application decisions. For example, a school that has a stellar year in basketball or football on average receives up to 10% more SAT scores. Certain demographic groups (males, Blacks, out-of-state students, and students who played sports in high school) are more likely to be influenced by sports success than their counterparts. The authors explore the reasons why students might be influenced by these sporting events and present evidence that attention/accessibility helps explain these findings.

Evaluation of policy options for expanding oyster aquaculture in Virginia.

State and federal policymakers are considering options to increase the harvest of native oysters (Crassostrea virginica) from the Chesapeake Bay and nearby coastal waters. This study investigates two policy options: reforming the current leasing system and increasing the amount of funding allocated to research and development. Analysis is based on a survey of oyster producers and an oyster bioeconomic simulation model. Results show that shellfish research aimed at increasing growth rates, reducing mortality, and reducing seed costs could significantly increase returns to oyster aquaculture. Reforming the current leasing system to expand the availability of oyster grounds would do little to increase oyster production because few growers view the current leasing system as a significant barrier to expanding their operations. Further research is needed to investigate other types of assistance to enhance oyster aquaculture and to estimate the producer response to possible price effects of expanding oyster output.