Estimating Exact Welfare Measures from Roback's Hedonic Price Models. An Application to Evaluation of the Externality of Rice Paddy Fields

The purpose of the paper is to derive a formula to calculate exact welfare measures from Roback's hedonic price models and to apply it to the externality of rice paddy fields. The formula is an extension of Horowitz's result on Rosen's hedonic price models.This paper briefly surveys the methodological progress of hedonic approach.Main findings of the application are that the compensating variation, that is the willingness to accept compensation, WAC, to 1% decrease of rice paddy field in Kyoto prefecture is annually 35, 000 yen per household and that the individual and aggregate WAC amount to 12 yen and 768, 000 yen per hector. The graph also shows that the WAC is proportional to the percentage decrease of rice paddy fields.