Estimating the Willingness to Pay for Urban Amenities with Spatial-Temporal Differences in Hedonic Prices

Based on a spatial-temporal general equilibrium model, we rigorously derive a measurement method using dynamic changes in cross-sectional hedonic prices to estimate the willingness to pay for urban amenity improvements. Hedonic approaches in the form of difference-in-differences or regression discontinuity design are classified in this method. Our unique supposition is that the dynamic changes in the inter-temporal ‘equilibrium utility’ are common across all residential locations. Since the change in the common equilibrium utility in all locations involves the changes in land rents and the amenities, their dynamic relation is obtainable. Our derived spatial-temporal hedonic approach has several advantages over the traditional cross-sectional approach (e.g., it controls for fixed effects in a simple way) , even though it requires a measurement or an additional assumption of marginal utility of income to provide a correct measure. We also extend the hedonic approaches by explicitly considering the existence of condominiums. Finally, we apply the method to an esthetic project