Grantee Research Project Results
2001 Progress Report: The Role of Locational Equilibria and Collective Behavior in Measuringthe Benefits of Air Pollution Policies
EPA Grant Number: R828103 aka R826609Title: The Role of Locational Equilibria and Collective Behavior in Measuringthe Benefits of Air Pollution Policies
Investigators: Smith, V. Kerry , Sieg, Holger
Institution: North Carolina State University , Carnegie Mellon University
Current Institution: North Carolina State University
EPA Project Officer: Chung, Serena
Project Period: February 21, 2001 through February 20, 2004
Project Period Covered by this Report: February 21, 2001 through February 20, 2002
Project Amount: $199,948
RFA: Decision-Making and Valuation for Environmental Policy (2001) RFA Text | Recipients Lists
Research Category: Environmental Justice
Objective:
This research project uses the characteristics of a spatial equilibrium to estimate the economic value of reductions in air pollution. This equilibrium includes recognition of households? choices of residential locations based on site characteristics, environmental amenities, as well as the collective choice process determining the amount of community-provided local public goods. This spatial equilibrium estimator (SEE) allows estimates of benefits from air pollution policy to consider general equilibrium adjustments in response to policy. It also permits a behaviorally consistent description of a policy?s consequences. The objectives of this research project are to: (1) extend the SEE framework to include environmental public goods and to allow for a more detailed characterization of the observable sources of heterogeneity in household preferences; (2) apply the SEE framework along with conventional hedonic property value and simple (i.e., multinomial logit) readiness utilization maintenance (RUM) frameworks using current data for air quality (primarily ozone, nitrogen oxide, and particulate matter), housing prices, characteristics, as well as community characteristics in the Los Angeles (LA) area; and (3) compare the benefit estimates implied by each framework for a set of current policy alternatives and their respective sensitivities to their maintained hypothesis.
Progress Summary:
Task 1: Develop and Estimate Extension to Spatial Equilibrium Estimator. During this year, the majority of our efforts were in response to referees' comments, and revising papers prepared during the initial phases of the research. Two new review papers were prepared that include consideration of the conceptual issues associated with this research. The first was published in the International Yearbook of Environmental and Resource Economics (2002), edited by T. Tietenberg and H. Folmer. The second was a paper for a special issue of Environmental and Resource Economics for the World Congress of the Association of Environmental and Resource Economics (AERE) and the European Association of Environmental and Resource Economics (EAERE).
Task 2: Assemble Data for Modeling. Data for LA, Ventura, Orange, Riverside, and San Bernadino counties were assembled and used in several analyses associated with the project. These analyses include:
1. Development of the evaluation of price indexes for the SEE framework.
2. Estimation of the 36 community and the 92 community versions of the SEE
framework. Development of comparison of SEE with Bartik-Kanemoto Bounds.
3. Analysis of hedonic and RUM models for H. S. Banzhaf's thesis comparison of the role of air pollution when evaluated in this context.
4. Extension of the analysis to consider expansion in the LA Unified School District (expanding the choice set for benefit measurement from 92 to 102 communities).
5. The geo-codes for the RECLAIM areas were used to identify locations for the properties in our database (see attached Figure 1). However, aside from simple hedonic models, we have not yet undertaken the planned detailed analysis.
6. The final stages of analysis of the San Diego data are largely completed. Air pollution data were merged with the housing data and estimates of ambient concentrations comparable to our LA work were developed. In addition, information about open space, other land uses, and educational performance were geo-coded and merged with the housing data.
Rather than submit the LA data in isolation, we included the San Diego data files as well, and will submit the full information base at the end of the project period.
Task 3: Estimation of SEE Framework with Southern California Data. As noted in last year's report, the full 92 school district model was estimated by the end of last year. Programs were developed to compute locational equilibria for revised air pollution conditions. These programs were extended to consider expansions in the communities to 102 areas (with the break-up of the LA Unified School District into 11 sub-districts). In addition, the framework was extended to consider air quality conditions that correspond to the scenarios developed for the Environmental Protection Agency's (EPA) 1999 Prospective Report for the LA area. Figure 2 plots the predictions of the Urban Airshed Model (UAM-V) for ozone within our study area. Figures 3 and 4 plot the General Equilibrium (GE) solutions for these scenarios for 2000 and 2010 for baseline and control situations in comparison to the 1990 reference point used in the Prospective Analysis. Developing these linkages was a significant component of this year's activities.
Task 4: Estimation of Hedonic and RUM Frameworks. Hedonic models for the RECLAIM area, as fixed effects, were estimated last year and will be used in subsequent research. In addition, estimates of hedonic property value models for the San Diego area were also completed.
Task 5: Benefit Measurement and Estimation. As noted above, earlier research completed estimates of partial and general equilibrium benefit estimates with the SEE framework for the LA area. In addition, Bartik-Kanemoto bounds were estimated. We also obtained the air quality projections for California used in the EPA's (1999) Prospective Analysis, match them to our model's study area, and to develop a general equilibrium benefit analysis for research to be reported at National Bureau of Economic Research (NBER) Conference on Empirical Environmental Economics in May 2002.
The tasks envisioned in our initial research plan have been completed. We still are in the process of preparing new papers as well as revising earlier papers prepared with the project. Our success in keeping on-schedule allowed expansion in the project to consider a new area that was not anticipated in our original design. We have assembled the property value, education, air pollution information, as well as the price indices and distributional information needed to implement the SEE framework. We also added open space and a measure of related land uses into this database. An additional methodological extension is being considered. This extension would attempt to include moment conditions to characterize net in-migration into an area as a component of the equilibrium conditions. Before developing the details of the modeling, we are considering the basic data needs and our ability to meet them.
Figure 1. Boundaries for the RECLAIM Trading Areas.
Figure 2. LA Metropolitan School Districts and Environmental Protection Agency (EPA) Urban Airshed Model (UAM) Locations for Estimated Ozone Readings.
Figure 3. Computed General Equilibrium Prices for With and Without Clean Air Act Amendments (CAAA) 2000 Compared to Baseline 1990.
Figure 4. Computed General Equilibrium Prices for With and Without Clean Air Act Amendments (CAAA) 2010 Compared to Baseline 1990.
Future Activities:
We are now developing the conceptual and computational analysis necessary to estimate this expanded model. It is not clear if we will be able to complete this research before the conclusion of the project. There is a reasonable prospect if we do not attempt the methodological extension. There are no further resources available for the principal investigators. Thus, our ability to undertake the work rests on our ability to use research time not committed to other projects to this effort. Primary attention will focus on tasks related to the initial design of the project, including the:
Completion of papers describing the research that has been finished and revising earlier papers for publication;
Completion of the documentation of the data;
Programming welfare analyses with the existing model to investigate its performance under different conditions; and
Estimation and evaluation of the San Diego model as time and resources permit.
The working paper from submission will be revised. The team has to complete the writeup of the Bartik-Kanemoto bounds analyses. A paper on the San Diego work will be completed. We expect to expand the data documentation to include the San Diego data and to submit a CD-ROM with the LA and San Diego data and documentation.
Journal Articles on this Report : 5 Displayed | Download in RIS Format
Other project views: | All 31 publications | 10 publications in selected types | All 9 journal articles |
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Type | Citation | ||
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Sieg H, Smith VK, Banzhaf HS, Walsh R. Estimating the general equilibrium benefits of large changes in spatially delineated public goods. International Economic Review 2004;45(4):1047-1078. |
R828103 aka R826609 (2001) R828103 aka R826609 (Final) |
Exit Exit |
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Sieg H, Smith VK, Banzhaf HS, Walsh R. Using locational equilibrium models to evaluate housing price indeces. Journal of Urban Economics. |
R828103 aka R826609 (2001) |
not available |
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Smith VK, Pattanayak S. Is meta-analysis a Noah's ark for non-market valuation? Environmental and Resource Economics 2002;22(1-2):271-296. |
R828103 aka R826609 (2001) R828103 aka R826609 (Final) |
Exit Exit |
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Smith VK, Banzhaf HS. A diagrammatic exposition of weak complementarity and the Willig condition. American Journal of Agricultural Economics 2004;86(2):455-466. |
R828103 aka R826609 (2001) R828103 aka R826609 (Final) |
Exit Exit |
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Smith VK, Sieg H, Banzhaf HS, Walsh R. Ozone improvement, household adjustments, and environmental policy analysis. Journal of Environmental Economics and Management. |
R828103 aka R826609 (2001) |
not available |
Supplemental Keywords:
air pollution benefits, benefit transfer practices, Los Angeles, LA, spatial equilibrium estimator, SSE., RFA, Scientific Discipline, Economic, Social, & Behavioral Science Research Program, Economics, decision-making, Social Science, Economics & Decision Making, air pollution policy, ecosystem valuation, locational equilibria, collective choice process, modelsRelevant Websites:
For additional research on this topic please see grant #R826609
Progress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.