The amenity cost of road noise

This paper reports a complete two stage hedonic analysis for road noise. It is based on a large and detailed administrative data set covering 100,000 housing transactions in Copenhagen, Denmark including data on the individual households occupying the transacted homes. For the estimation of the hedonic price function I develop a spatial research design which simultaneously reduces the risk of omitted variable bias and addresses the risk of measurement error in the noise measure. The preference parameters are locally identified by approximating utility through a simple functional form. The recovered preference parameters reveal a great deal of heterogeneity across households. Observable demographic characteristics explain up to 40 percent of the variation in taste for quiet. Results are used to discuss willingness to pay for noise reductions from two policy measures: A European standard on noise emissions for tires, and the partial closure of a busy road in central Copenhagen.