Environmental Economics

Deriving Benefit Measures with Higher Precision: A Study of Economic Values of Air Quality

A calibration strategy using ridge regression to generate more precise estimates for a particular parameter in a regression model is proposed. Formulae to compute the proposed ridge estimates from standard OLS results are provided. Marginal effects of air pollution on property values for nineteen published studies are recomputed. Results show that ridge estimates are superior to the OLS estimates under the mean squared error criterion in all nineteen studies. The same strategy could be used to re-estimate key parameters of interest in other applications such as price elasticities for demand forecasts or the value of a statistical life from hedonic wage regressions.

  • Keywords

    1. Benefits Analysis
    1. Benefits Analysis - Valuation
    1. Benefits Analysis - Valuation - Revealed Preference
    1. Benefits Analysis - Valuation - Revealed Preference - Property Value
    Environmental Media:
    a. Air
    a. Air - Tropospheric
    Huang, Ju-Chin
    EPA Project Officer/ Manager:
    Geographic Area:
    Study Purpose:
    Methodology Development & Evaluation
    Inventory Record #: EE-0500
  • Participating Organizations

    Research Organization:

    Environmental Protection Agency, Office of Policy, Economics, and Innovation, National Center for Environmental Economics and University of New HampshireAddress:
    City: State: ZIP:
    Phone: Fax:
  • Report Details
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    Date Linked: 05/28/2009