Housing Quality Differentials in Urban Areas

This paper applies an equilibrium quality theory for differentiated products to estimate the willingness to pay for improvements in the air quality of Chicago, Cleveland, Dallas, Houston, and Indianapolis. The empirical results show (i) that the structural approach and the standard nonstructural approach give very different benefit figures even for small improvements in air quality, and (ii) that a uniform improvement in air quality implies significant distributional effects.

Working Paper No. 4(1.48 MB)