Hedonic Price Analysis and Selectivity Bias: Water Salinity and Demand for Land

  • Phoebe Koundouri
  • Panos Pashardes
Part of the Economy & Environment book series (ECEN, volume 23)


Groundwater scarcity has an important qualitative dimension that further limits the supply of usable water. Groundwater quality may affect the productivity of land as an input in agricultural production. Where this is so, the structure of land rents and prices will reflect these environmentally determined productivity differentials. Hence, by using data on land rent or land value for different properties we can in principle identify the contribution which the attribute in question, fresh groundwater quality, makes to the value of uwillingness to pay for) the traded good, land. This identifies an implicit or shadow price for the attribute fresh groundwater quality, which in turn can be interpreted as an estimate of the in situ scarcity value of the marginal unit of the environmental resource. Methods commonly used to implement this approach include (i) the hedonic technique pioneered by Griliches (1971) and formalized by Rosen (1974); and (ii) the travel cost valuation methods first proposed by Hotelling (1931), and subsequently developed by Clawson (1959) and Clawson and Knetsch (1966). The relationship between land prices and surface and groundwater access (both in quantity and quality terms) has been studied in the hedonic framework by Miranowski and Hammes (1984), Gardner and Barrows (1985), Ervin and Mill (1985), King and Sinden (1988), Caswell and Zilberman (198b) and Torell et al. (1990). Travel cost techniques employed to measure the welfare effects to changes in water quality of recreational sites include Binkley (1978), Freeman (1979), Caulkins et al. (1986), Smith and Desvousges (1986) and Bockstael et al. (1987).


Seawater Intrusion Saltwater Intrusion Touristic Development Fresh Groundwater Land Usage 
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© Springer Science+Business Media Dordrecht 2002

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  • Phoebe Koundouri
  • Panos Pashardes

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