5 pts) A study by Uyeno, Hamilton and Biggs (1993, Journal of Transport Economic

Question

5 pts) A study by Uyeno, Hamilton and Biggs (1993, Journal of Transport Economics and Policy) estimated the effect of airport noise on residential property values. They estimated the following equation:

              where:

ln H – log of property value H

b0 – a constant term

b1 – noise coefficient

bi – coefficient of ith variable

NEF – measure of noise level

u – error term

The estimated value of b1 is -0.0065. Interpret this coefficient

Suppose that the estimated equation is in log-log form and b1 = -0.0065.

What is the interpretation of b1 in this case?

Explanation / Answer

The interpretations is as follows:

Corresponding to 1% increase in noise level there is 0.0065% decrease in property value., holding other predicotrs fixed.

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