urban economics homework EXAMPLE 2.6 Using data from 1988 for houses sold close
ID: 1095007 • Letter: U
Question
urban economics homework
EXAMPLE 2.6 Using data from 1988 for houses sold close to garbage mill, following equation relates housing price to distance from garbage incinerator: log(price) = 9.4 + 0.312log(dist); n = 135; R^2 = 0.162 (6) 1. Interpret the coefficient on log(dist). Is the sign of this estimate what you expect it to be? 2. Do you think simple regression provides an unbiased estimator of the ceteris paribus elasticity of price with respect to dist? (Think about the citys decision on where to put the incinerator.) 3. What other factors about a house affect its price? Might these be correlated with distance from the incinerator?Explanation / Answer
Using data from 1988 for houses sold in Andover, Massachusetts, from Kiel and McClain (1995), the following equation relates housing price (price) to the distance from a recently built garbage incinerator (dist):
log(price ) = 9.40 + 0.312 log(dist)
n = 135, R^2 = 0.162.
(i) Interpret the coefficient on log(dist). Is the sign of this estimate what you expect it to be?
The coefficient on log(dist) is 0.312. It means that if there is a one unit increase in log(dist), the log(price) will increase by 0.312 units. Yes, the sign of this estimate is what we expect because as the distance is increasing, the price should also be increased.
(ii) Do you think simple regression provides an unbiased estimator of the ceteris paribus elasticity of price with respect to dist? (Think about the city
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