Estimating the willingness to pay for urban esthetic projects using an inter-temporal equilibrium: a difference-in-differences hedonic approach

Based on an inter-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 esthetic projects. The method has advantages in common with a difference-in-differences approach. For example, fewer attributes are used as explanatory variables than with a cross-sectional hedonic approach because fixed effects can be ignored. It can therefore mitigate problems related to omitted variables and multicollinearity, which are prevalent in cross-sectional hedonic approaches. Nevertheless, either the measurement or one additional assumption of marginal utility of income is necessary for provision of correct measures. In addition, we consider the existence of condominiums, which has not been supposed in conventional hedonic approaches but must always be considered in practical situations. We apply the method to utility line undergrounding projects.