Panel Data Hedonics: Rosen's First Stage as a "Sufficient Statistic"
Traditional cross-sectional estimates of hedonic price functions can recover marginal willingness to pay for characteristics, but face endogeneity problems for estimating non-marginal welfare measures. I show that when panel data on household demands are available, one can construct a second-order approximation to non-marginal welfare measures using only the first-stage marginal prices. With repeated cross sections of product prices, the measure can be set identified or, under a single-crossing restriction, point identified. Bounds also can be constructed when there are mobility costs. Finally, a variant remains valid when individual preferences shift over time.
This paper is a revision of several sections of an earlier paper, "Panel Data Hedonics: Rosen's First Stage and Difference-in-Differences as Sufficient Statistics," which was circulated in August 2015 as Working Paper 21485. A companion paper to this revision, which contains material in the original paper that is not included in this revision, may be found here.
Document Object Identifier (DOI): 10.3386/w21485
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