Determining the value of open space in South Africa: A spatial hedonic analysis

Khathutshelo Michael Sikhitha, University of Rhode Island

Abstract

This study applies revealed preference methods to determine the value of environmental attributes in the Louis Trichardt town of South Africa. Specifically, a spatial hedonic property value model is applied on residential property data to estimate the non market values of open space attributes such as neighbourhood parks. Estimation of non-market values is necessary in order to incorporate environmental concerns in a tangible way when development and urban land use decisions are undertaken so as to contribute to efficient urban development and land use policies. This is primarily because development and urban land use decisions frequently consider only direct financial (market) effects while failing to consider non-market economic values, such as the values of environmental amenities. The use of non-market valuation methods is required primarily because environmental goods have no markets where they can be traded, but this lack of markets cannot justify their ignorance in land use decision making processes. ^ The estimation of the value of open space is achieved through a careful analysis of residential property and its associated attributes. Because of the spatial configuration of residential properties, spatial dependencies are likely to occur and if not explicitly accounted for, this may result in regression estimates that violate the basic assumptions of the classical linear regression model. For example, spatial dependencies are likely to cause regression estimates to be biased, inefficient and inconsistent. Furthermore, the dependent variable and the error terms may not longer be independent. To overcome these potential problems, spatial econometric techniques are applied to help improve the estimates of the regression model. Specifically, this study estimates a spatial lag dependence model to account for spatial dependencies that are likely to be inherent in real estate data. ^ The results of the study show that the application of spatial econometric techniques does improve the regression estimates. The results also show that the residents in the study area do value open space and are willing to pay a higher premium for proximity to open space attributes. The findings from this study will provide policy makers with information that will not only motivate the formulation of more efficient land-use policies, but will assist policy makers in making informed decision on the optimal amount of urban development and open space preservation.^

Subject Area

Economics, Environmental|Economics, Agricultural|South African Studies

Recommended Citation

Khathutshelo Michael Sikhitha, "Determining the value of open space in South Africa: A spatial hedonic analysis" (2011). Dissertations and Master's Theses (Campus Access). Paper AAI3438927.
http://digitalcommons.uri.edu/dissertations/AAI3438927

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