Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Market
Daniel M. Sullivan
Harvard University
April 4, 2015
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 1 / 16
How do you determine prices without a market?
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 2 / 16
What is the price of clean air?
What experiment would you design to find the WTP for clean air?
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 3 / 16
What is the price of clean air?
What experiment would you design to find the WTP for clean air?
This is actually an open research question!
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 3 / 16
What is the price of clean air?
What experiment would you design to find the WTP for clean air?
This is actually an open research question!
One idea is to use the idea of spatial equilibrium and house prices.
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 3 / 16
Spatial Equilibrium
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 4 / 16
Spatial Equilibrium
Two cities: Los Angeles and New York. Let’s say that both cities have
the same income opportunities, amenities, and house prices.
I What happens if firms in New York start offering higher wages?
I In the long run, who is better off, people living in LA or New York?
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 4 / 16
Spatial Equilibrium
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 5 / 16
Spatial Equilibrium
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 5 / 16
Spatial Equilibrium
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 5 / 16
Spatial Equilibrium
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 5 / 16
Spatial Equilibrium
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 5 / 16
Spatial Equilibrium
UtilityNY = UtilityLA
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 5 / 16
Spatial Equilibrium
Getting a dollar value
UtilityNY = UtilityLA
AmenitiesNY − House PriceNY = AmenitiesLA − House PriceLA
What happens if LA enacts tougher air pollution regulations (an
amenity improvement)?
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 6 / 16
Spatial Equilibrium
Getting a dollar value
UtilityNY = UtilityLA
AmenitiesNY − House PriceNY = AmenitiesLA − House PriceLA
What happens if LA enacts tougher air pollution regulations (an
amenity improvement)?
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 6 / 16
Spatial Equilibrium
Getting a dollar value
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 7 / 16
Measuring the value of clean air
Pollution in LA
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 8 / 16
0.9 0.65
0.8
0.60
0.7
0.5
0.50
0.4
0.3 0.45
0.2
0.40
0.1
0.0 0.35
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
Electric Non-electric
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 9 / 16
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 10 / 16
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 11 / 16
Crunch the numbers
−0.017
| {z }
× −1.5 µg/m3 × $350,000 ≈ $9,000
| {z } | {z } | {z }
%∆p per NOx Avg. ∆NOx p̄ in 2000 (2010$) Gain per house
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 12 / 16
Crunch the numbers
−0.017
| {z }
× −1.5 µg/m3 × $350,000 ≈ $9,000
| {z } | {z } | {z }
%∆p per NOx Avg. ∆NOx p̄ in 2000 (2010$) Gain per house
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 12 / 16
Bonus: Value of Crime
Linden and Rockoff (2008) American Economic Review
r1
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 13 / 16
Bonus: Value of Crime
Linden and Rockoff (2008) American Economic Review
r1 r0
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 14 / 16
Bonus: Value of Crime
Linden and Rockoff (2008) American Economic Review
r1 r0
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 15 / 16
Bonus: Value of Crime
Linden and Rockoff (2008) American Economic Review
Daniel M. Sullivan (Harvard University) Spatial Eq. and Prices April 4, 2015 16 / 16