Including migration in hedonic valuation: earthquakes
This paper is an attempt to estimate the willingness to pay for earthquake reduction in and around the province of Groningen (2012-2018), whilst using a discrete choice model to incorporate psychological costs.
This study goes beyond the traditional wage-hedonic models by attempting to incorporate the psychological costs of migration into a discrete choice model to value the disamenity of future earthquake risk for residents in the northern part of the Netherlands, as perceived in 2012-2018. Using individual-specific data provided by Statistics Netherlands, this research estimates house amenity valuations, income parameters and measurements for migration costs. These are used as inputs to calculate the effect of earthquake risk on the utility valuation of a region. This study evaluates whether this innovative model can contribute to the research. It is concluded that this model of discrete choice needs some major adjustments before it can be properly applied on to the housing market in the Netherlands. This study shows that, in order to make the model of residential choice work in this situation, a better specified income specification needs to be formulated, which allows individuals to differ based on region of residence.