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The influence of water quality on the demand for residential development around Lake Erie
| Title: | The influence of water quality on the demand for residential development around Lake Erie |
| Author: | Ara, Shihomi |
| Description: | The main objective of this research is to reveal the effects of water quality on housing values around Lake Erie. Both the first and the second stage of hedonic price analysis are conducted with identified housing submarkets by using Hierarchical Clustering with quantized similarity measures in the region including Erie, Lorain, Ottawa and Sandusky Counties located along Lake Erie. We use both individual houses and census block groups as the smallest building blocks of the clusters and compare the clustering and hedonic results for both cases. Fecal coliform counts and secchi disk depth readings measuring water clarity are used as water quality variables. In order to overcome the spatio-temporal aspects of secchi depth disk reading data, kriging is used for spatial prediction. Robust Lagrange Multiplier test indicates that spatial error models are appropriate for the estimation of hedonic price functions in each submarket. We found that secchi disk depth readings variables are positive significantly influencing housing prices in most of the clusters while mixed results are found for fecal coliform counts. Demand functions with different functional forms are estimated with two-stage least squares with submarket dummy variables. While computed welfare changes for fecal coliform by using non-linear demand functions are very small, the benefit of the improvement of water clarity by 25 centimeters to be estimated 230 dollars per household. We found that the welfare changes are larger for the degradation of water quality compared to the improvements of water quality in the same amount. We further analyzed the welfare changes by using demand functions derived specifically for each household. Welfare changes based on the individual demand functions were computed by integrating under each demand curve for multiple scenarios. If we consider our SIG Fecal data represents 33 percent of entire population in four counties, the total estimated net benefit was derived as 51,934,180 dollars for targeting 155 fecal coliform counts. The total net welfare gain was computed as 899,010,835 dollars for targeting 245 centimeters of water clarity. |
| Permanent Link: |
http://rave.ohiolink.edu/etdc/view?acc_num=osu1184599591
http://hdl.handle.net/2374.OX/5011 |
| Date: | 2007 |
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