What are public services worth, and to whom? Non-parametric estimation of capitalization in Pune

The availability and quality of basic public services are important determinants of urban quality of life. In many cities, rapid population growth and fiscal constraints are limiting the extent to which urban governments can keep up with increasing demand for these services. It therefore becomes imp...

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Bibliographic Details
Published in:Journal of housing economics 2008-03, Vol.17 (1), p.34-64
Main Authors: Lall, Somik V., Lundberg, Mattias
Format: Article
Language:English
Subjects:
Economic Development: Regional, Urban, and Rural Analyses
Estimation
H40
Hedonic models
Housing Supply and Markets R310
India
Maharashtra
Non-parametric estimation
Public Goods H410
Public services
R21
Transportation O180
Urban areas
Urban government
Willingness-to-pay
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Summary:The availability and quality of basic public services are important determinants of urban quality of life. In many cities, rapid population growth and fiscal constraints are limiting the extent to which urban governments can keep up with increasing demand for these services. It therefore becomes important to prioritize provision of those services to best reflect local demand. We present a strategy to estimate the demand for public services, which is sensitive to heterogeneity in preferences across types of households, and the non-parametric estimation addresses problems arising from functional form restrictions. Using data from Pune, India, we estimate the demand for public services, as represented by the marginal change in the self-assessed monthly rental price of dwellings from the services. We find that the value of publicly-provided services accruing to the poor is greater than that going to wealthier households, and even untargeted across-the-board investment in specific services can be progressive.
ISSN:1051-1377
1096-0791
DOI:10.1016/j.jhe.2007.07.001