Does the estimated impact of wildfires vary with the housing price distribution? A quantile regression approach

Julie M Mueller, John B. Loomis

Research output: Contribution to journalArticle

11 Citations (Scopus)

Abstract

Hedonic property models are commonly applied in the environmental economics literature to estimate values of environmental amenities or hazards. Most hedonic property models are estimated using linear regression techniques where the coefficient on the environmental variable of interest is the "marginal implicit price." Linear regression estimates one coefficient for the entire distribution of the dependent variable, and thus in hedonic property models a single marginal implicit price. In contrast, quantile regression estimates a range of marginal impacts for different quantiles of the distribution for the dependent variable, consequently providing a significantly more "complete picture" of the true impact of the explanatory variable (Koeneker and Hallock, 2001). We contribute to the existing hedonic property literature by estimating the impact of repeated wildfires on house prices in Southern California using quantile regression. We find that the impact of a wildfire differs significantly across the distribution of house prices, with estimated coefficients varying as much as 73% from the 25th quantile relative to the 75th quantile. We also find that OLS results under-estimate impacts relative to the median quantile, yet over-estimate impacts for lower quantiles. Our results indicate that a quantile regression approach can provide policymakers and researchers more information about the marginal implicit price in hedonic models as it relates to the distribution of the dependent variable.

Original languageEnglish (US)
Pages (from-to)121-127
Number of pages7
JournalLand Use Policy
Volume41
DOIs
StatePublished - 2014

Fingerprint

wildfires
wildfire
housing
regression
environmental economics
ecological value
amenity
researchers
distribution
price
hazard
environmental factors
economics
Values

Keywords

  • Hedonic property models
  • Quantile regression
  • Wildfires

ASJC Scopus subject areas

  • Forestry
  • Nature and Landscape Conservation
  • Geography, Planning and Development
  • Management, Monitoring, Policy and Law

Cite this

Does the estimated impact of wildfires vary with the housing price distribution? A quantile regression approach. / Mueller, Julie M; Loomis, John B.

In: Land Use Policy, Vol. 41, 2014, p. 121-127.

Research output: Contribution to journalArticle

@article{03c39ab545014060b30889de28a04ec6,
title = "Does the estimated impact of wildfires vary with the housing price distribution? A quantile regression approach",
abstract = "Hedonic property models are commonly applied in the environmental economics literature to estimate values of environmental amenities or hazards. Most hedonic property models are estimated using linear regression techniques where the coefficient on the environmental variable of interest is the {"}marginal implicit price.{"} Linear regression estimates one coefficient for the entire distribution of the dependent variable, and thus in hedonic property models a single marginal implicit price. In contrast, quantile regression estimates a range of marginal impacts for different quantiles of the distribution for the dependent variable, consequently providing a significantly more {"}complete picture{"} of the true impact of the explanatory variable (Koeneker and Hallock, 2001). We contribute to the existing hedonic property literature by estimating the impact of repeated wildfires on house prices in Southern California using quantile regression. We find that the impact of a wildfire differs significantly across the distribution of house prices, with estimated coefficients varying as much as 73{\%} from the 25th quantile relative to the 75th quantile. We also find that OLS results under-estimate impacts relative to the median quantile, yet over-estimate impacts for lower quantiles. Our results indicate that a quantile regression approach can provide policymakers and researchers more information about the marginal implicit price in hedonic models as it relates to the distribution of the dependent variable.",
keywords = "Hedonic property models, Quantile regression, Wildfires",
author = "Mueller, {Julie M} and Loomis, {John B.}",
year = "2014",
doi = "10.1016/j.landusepol.2014.05.008",
language = "English (US)",
volume = "41",
pages = "121--127",
journal = "Land Use Policy",
issn = "0264-8377",
publisher = "Elsevier Limited",

}

TY - JOUR

T1 - Does the estimated impact of wildfires vary with the housing price distribution? A quantile regression approach

AU - Mueller, Julie M

AU - Loomis, John B.

PY - 2014

Y1 - 2014

N2 - Hedonic property models are commonly applied in the environmental economics literature to estimate values of environmental amenities or hazards. Most hedonic property models are estimated using linear regression techniques where the coefficient on the environmental variable of interest is the "marginal implicit price." Linear regression estimates one coefficient for the entire distribution of the dependent variable, and thus in hedonic property models a single marginal implicit price. In contrast, quantile regression estimates a range of marginal impacts for different quantiles of the distribution for the dependent variable, consequently providing a significantly more "complete picture" of the true impact of the explanatory variable (Koeneker and Hallock, 2001). We contribute to the existing hedonic property literature by estimating the impact of repeated wildfires on house prices in Southern California using quantile regression. We find that the impact of a wildfire differs significantly across the distribution of house prices, with estimated coefficients varying as much as 73% from the 25th quantile relative to the 75th quantile. We also find that OLS results under-estimate impacts relative to the median quantile, yet over-estimate impacts for lower quantiles. Our results indicate that a quantile regression approach can provide policymakers and researchers more information about the marginal implicit price in hedonic models as it relates to the distribution of the dependent variable.

AB - Hedonic property models are commonly applied in the environmental economics literature to estimate values of environmental amenities or hazards. Most hedonic property models are estimated using linear regression techniques where the coefficient on the environmental variable of interest is the "marginal implicit price." Linear regression estimates one coefficient for the entire distribution of the dependent variable, and thus in hedonic property models a single marginal implicit price. In contrast, quantile regression estimates a range of marginal impacts for different quantiles of the distribution for the dependent variable, consequently providing a significantly more "complete picture" of the true impact of the explanatory variable (Koeneker and Hallock, 2001). We contribute to the existing hedonic property literature by estimating the impact of repeated wildfires on house prices in Southern California using quantile regression. We find that the impact of a wildfire differs significantly across the distribution of house prices, with estimated coefficients varying as much as 73% from the 25th quantile relative to the 75th quantile. We also find that OLS results under-estimate impacts relative to the median quantile, yet over-estimate impacts for lower quantiles. Our results indicate that a quantile regression approach can provide policymakers and researchers more information about the marginal implicit price in hedonic models as it relates to the distribution of the dependent variable.

KW - Hedonic property models

KW - Quantile regression

KW - Wildfires

UR - http://www.scopus.com/inward/record.url?scp=84902357064&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84902357064&partnerID=8YFLogxK

U2 - 10.1016/j.landusepol.2014.05.008

DO - 10.1016/j.landusepol.2014.05.008

M3 - Article

VL - 41

SP - 121

EP - 127

JO - Land Use Policy

JF - Land Use Policy

SN - 0264-8377

ER -