A Hedonic Approach
Chapter 5: Empirical Examination of the Accuracy of the Hedonic Approach
5. Empirical examination of the accuracy of the hedonic measure LARGE NATIONAL PROJECT EVALUATION In the last chapter, we demonstrated that the hedonic measure can be a very good estimate of the real gross beneﬁts of the projects in the non-marginal cases using general equilibrium analysis. But we should be wary of the results because of the nature of numerical analysis, using hypothetical values of parameters. Thus, in this chapter, in order to validate the hedonic measure, we now apply it in the evaluation of a real project in Japan. The method we use is to compare the beneﬁts of the project in terms of equivalent variation and the hedonic prices calibrated using a general equilibrium model and to test the diﬀerences between the EV value and the hedonic measure calculated using the nationwide estimated hedonic price function. INTRODUCTION OF ACCESSIBILITY AND THE MODEL REVISED Accessibility The validity of the hedonic measure was assessed using the Hokuriku highway project, one of the main highway projects in Japan. The highway runs through ﬁve of the 47 prefectures (Japanese administrative jurisdictions), and will be the trunk road for the areas bordering the Sea of Japan. There should be spillover eﬀects of the project because of its large impact on the Japanese economy. We modify the model to include this eﬀect in both utility and production by the introduction of an accessibility measure (ACC ). This measure is deﬁned as follows: ACCi ϭ Ά͚ k (DIDni ·DIDnk)/[minm (Pm...
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