In this project, you will use house price hedonics to determine the costs of air pollution. In particular, you will examine the costs imposed by ozone pollution in the Bay Area of California. YOU CAN WORK IN GROUPS OF UP TO THREE INDIVIDUALS. Ground level ozone has a variety of negative health consequences - for details, see the following web page:
House price hedonics uses the way in which house prices vary with pollution to infer the value of the latter - the slope of the hedonic price function tells us the individual's marginal willingness to trade other consumption for cleaner air, holding utility constant.
You are given two data files: bayarea_house_data_cs.txt and bayarea_house_data_panel.txt. Each contains information on 10,000 house sales observed over the period 1990 - 2003. In "bayarea_house_cross_section", you observe each home only once. The data set contains information on the following variables:
- identification number (id)
- year of house sale (year)
- transaction price of house (price)
- number of days air quality at house exceeded state standard for ozone, calculated by using (1/distance) weights (daysmax)
- number of days air quality at house exceeded state standard for ozone, calculated by using (1/distance2) weights (daysmaxb)1
- lot size (lot)
- square footage (sqft)
- number of bathrooms (bath)
- number of bedrooms (bed)
- total number of rooms (room)