ABSTRACT
This chapter examines a new approach for measuring the general equilibrium willingness to pay for large changes in spatially delineated public goods such as air quality. General equilibrium effects on benefits are typically ignored because estimates of nonmarket values of environmental amenities are derived from a partial equilibrium framework. A general equilibrium evaluation of the effects of large changes in air quality across the set of communities allows households to adjust their community locations in response to the changes. Locational equilibrium models offer a parsimonious approach for estimating the distribution for a general equilibrium measure of household willingness to pay associated with large policy changes. The chapter describes the unique data set on housing prices and characteristics, air quality, and public education that is available for Southern California. An interpolation problem must be addressed in associating school districts with air quality levels based on spatially discrete measures.
