The Economic Valuation of the Environment and Public Policy
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The Economic Valuation of the Environment and Public Policy

A Hedonic Approach

Noboru Hidano

The importance of the hedonic valuation approach in public policy evaluation and environmental value estimation is now widely accepted. This book is especially designed to illustrate the basic assumptions of the hedonic approach and highlight the strengths and weaknesses associated with it. Combining rigorous theoretical analysis, detailed empirical studies and an extensive history of hedonic valuation, the book is both a good introductory text to the field and a precise yet comprehensive aid for professionals and practitioners alike.
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Chapter 9: Environmental Cost–Benefit Analysis Using the Hedonic Price Method

A Hedonic Approach

Noboru Hidano


9. Environmental cost–benefit analysis using the hedonic price method INTRODUCTION As discussed in previous chapters, we can utilize stable and understandable values of the environment and public projects using the hedonic price method. In this chapter we explain how to proceed with cost–benefit analysis based upon the values estimated by the hedonic price method. It should be noted here that the process of cost–benefit analysis is basically the same as with ordinal cases but it requires special attention in handling the values because of the nature of the hedonic method, which is not necessarily taken into account by a standard textbook of cost–benefit analysis. Thus we shall explain the whole procedure of cost–benefit analysis with special emphasis on the hedonic price method. BASIC PRINCIPLES OF COST–BENEFIT ANALYSIS Theoretical Considerations Measurement of benefit for individuals Cost–benefit analysis in this book means analysis that is used to examine the usefulness of a project or a policy-related environment or the provision of public services, from the viewpoint of society at large, rather than that of individuals, firms or organizations. It is thus different from firms’ accounting valuation or quasi-public organizational justifications of their spending. The questions are ‘what is society?’ or ‘who comprises the society?’. The former question is difficult to answer but we shall discuss the social welfare func102 Environmental cost–benefit analysis using the hedonic price method 103 tions. Society is composed...

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