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Using data from 1988 for houses sold in Andover, Massachusetts, from Kiel and McClain (1995)
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): Tog (price) - 9.40 + 0.312 loyldan - 135, R -0.162 () Interpret the coefficient on log(dist). Is the sign of this estimate what you expect it to be? (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's decision on where to put the incinerator.) (iii) What other factors about a house affect its price? Might these be correlated with distance from the incinerator?
Expert Solution
Answer:
I: The coefficient in log-dist-is 0.312 which is positive indicating that increase in log(dist) has a positive effect on log-cost This implies increase in good ways from trash incinerator increases the cost
The indication of gauge is required as individuals tend to not live in territory with trash incinerator because of smell and pollution
ii: The assessor of the ceteris peribus elasticity pf cost as for dist doesn't give the fair assessor to cost as just 1 variable is considered where's cost may rely upon numerous mnay factors The choice to put incinerator there may be from the way that that land was at that point less important and consequently won't depriciate much
iii: Other components may influence the house cost are Quality of Air accessibility of parks, Availability of Hotels Clean water Good shopping market close by and so on Indeed a portion of these thing may be connected Eg Level of pollution or nature of air may be associated with separation of trash incinerator
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