SPATIAL HEDONICS AND THE WILLINGNESS TO PAY FOR RESIDENTIAL AMENITIES*

We investigate the role of spatial multipliers when using spatial-lag hedonic models to measure the benefits of residential amenity improvements. Such benefits are commonly measured using the product of the coefficient of the amenity in question and a spatial multiplier. We show this is correct only when the spatial spillovers transmitted through the multiplier are strictly technological. If they are instead strictly pecuniary, then benefits are fully measured using the coefficient with no spatial multiplier. In either case, or in intermediate cases where both types of spillovers exist, a spatial-lag specification is required to obtain valid benefits measures.