difference in price reveals the buyer’s assessment of the environmental features.
While there are some limits to these methods, they do enable, in several cases, the
valuation of a vast range of environmental features.
8.6.1 Property Values
Property values exhibit a very good example of the substitute-market method. The
value of a house depends on many factors including location, size, type of construction and the quality of its environment. When the factors of location (access to shops,
transport and work), size, construction type are accounted for, the price difference
between similar units mainly echoes the remaining parameters related to environmental features. A house located near the beach or with a panoramic view on a
mountain scenery are examples. The information collected from the resulting variations in house prices may yield auxiliary values for estimating the unpriced
parameter.
8.6.2 Other Land-Value Approaches
Other land-value methods use the same principle as that for property values. In this
case, the retail land prices (a market price which is accessible) help in estimating a
combination of impacts. If land parcels in a given neighbourhood are sold at
different prices, it is logical to assume that, the differences between them arise
from one of two factors: (1) the productivity of the given piece of land or (2) unpriced
environmental features.
8.6.3 Wage Differentials
The method using wage differentials is similar to that using property values. It
assumes that in a perfectly competitive equilibrium:
1. labour will be in demand so long as the marginal worker output exceeds his
wages and
2. that the labour supply depends not only on wages, but varies also with working
and living conditions.
Thus a higher wage is required to induce workers to accept risky occupations or to
toil in polluted areas. It is acknowledged that workers can move at will among jobs
and can therefore select specific jobs in certain areas at definite wages maximising
their utility. This method cannot be applied if wages are established centrally unless
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8 Analysis of Environmental Impacts of Infrastructure
While there are some limits to these methods, they do enable, in several cases, the
valuation of a vast range of environmental features.
8.6.1 Property Values
Property values exhibit a very good example of the substitute-market method. The
value of a house depends on many factors including location, size, type of construction and the quality of its environment. When the factors of location (access to shops,
transport and work), size, construction type are accounted for, the price difference
between similar units mainly echoes the remaining parameters related to environmental features. A house located near the beach or with a panoramic view on a
mountain scenery are examples. The information collected from the resulting variations in house prices may yield auxiliary values for estimating the unpriced
parameter.
8.6.2 Other Land-Value Approaches
Other land-value methods use the same principle as that for property values. In this
case, the retail land prices (a market price which is accessible) help in estimating a
combination of impacts. If land parcels in a given neighbourhood are sold at
different prices, it is logical to assume that, the differences between them arise
from one of two factors: (1) the productivity of the given piece of land or (2) unpriced
environmental features.
8.6.3 Wage Differentials
The method using wage differentials is similar to that using property values. It
assumes that in a perfectly competitive equilibrium:
1. labour will be in demand so long as the marginal worker output exceeds his
wages and
2. that the labour supply depends not only on wages, but varies also with working
and living conditions.
Thus a higher wage is required to induce workers to accept risky occupations or to
toil in polluted areas. It is acknowledged that workers can move at will among jobs
and can therefore select specific jobs in certain areas at definite wages maximising
their utility. This method cannot be applied if wages are established centrally unless
230
8 Analysis of Environmental Impacts of Infrastructure