ABSTRACT

Quality of life factors are important determinants of city sustainability. If public resources are to be used efficiently, policymakers need accurate estimates of both the benefits and the costs of environmental improvements. Although cost estimates may be readily assembled, deriving estimates of the benefits from nonmarket goods is often difficult. One technique to derive estimates of environmental quality is the intercity hedonic approach which evaluates compensating wage differentials resulting from location-specific goods. For example, if reduced exposure to environmental hazards is of value to residents, then they should be motivated to avoid hazardous locations, and seek out cities with fewer hazards. Residents of safer locations pay for that privilege by accepting lower wages. In this paper, this “hedonic” or “implicit value” approach is used to determine whether workers of different race and ethnicity are impacted by local amenities, fiscal factors, and the density of noxious facilities in their regions. Using 1990 U.S. Census data, I find that jobs in locations that are less amenable, that have a high tax burden, and a high density of noxious facilities must compensate their workers by offering higher wages. Compensation levels are found to depend on the race and ethnicity of workers.