ABSTRACT
Economists have documented the relationship between the prices of housing units and quantities of environmental amenities since before this relationship was recognized as an application of the theory of hedonic prices (for example, Ridker and Henning 1967). Indeed, examples of the statistical analysis of the linkage between farmland prices and the characteristics of the land can be found as early as 1922. See Colwell and Dilmore (1999) for a review. The past 35 years have seen an explosion of both theoretical and empirical studies of the monetary values of nonmarket amenities and disamenities based on hedonic price theory. It is now well accepted that housing price differentials do reflect differences in the quantities of various characteristics of housing and that these differentials have significance for applied welfare analysis. For example, Smith and Huang (1995) conducted a meta-analysis of hedonic studies of air pollution and housing prices. They reported finding 37 studies and more than 160 separate estimates of the effects of air quality on housing prices.
