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The Welfare Impacts of Large Urban Noise Reductions: Implications from Household Sorting in Vienna

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Abstract

We develop a pure characteristics equilibrium sorting model to recover estimates of willingness to pay (WTP) for both marginal and non-marginal changes in urban noise exposure. Using data from Vienna, Austria, we provide several new insights in the urban noise literature. First, we demonstrate the importance of considering general equilibrium feedback effects following large changes in noise levels. We document impacts to residents in policy targeted and non-targeted locations due to changes in both noise and equilibrium prices. Second, we confirm evidence of the importance of noise thresholds with significant and increasing negative impacts associated with increases in area covered by high levels of noise at 50 dB and 60 dB thresholds, respectively. Finally, we use an equilibrium sorting model to predict new price patterns and welfare implications following hypothetical policy changes that alter the distribution and intensity of nighttime noise in Vienna and are relevant to other urban settings seeking to reduce noise levels. Our work additionally provides a roadmap for conducting similar equilibrium sorting work in data limited settings outside the U.S.

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Notes

  1. To compare our sample of building transactions to the universe of buildings in Vienna we plot the distribution for key attributes in Appendix Figure 6. Both building area and building height have similar appearances with a bimodal distribution reflecting single and multi-family dwellings. For public goods measures we see that our sample and the overall building stock in Vienna are extremely similar suggesting that there do not exist significant differences between overall housing stock and the building sales data available from the City of Vienna.

  2. For robustness, we obtained and use district level 25th, 50th and 75th percentiles attached to each tract within the district for comparison. We report these results in Appendix Table 7 and 8 finding qualitatively similar results to our primary specification.

  3. To the extent that households locating in high noise locations may not have as strong of noise preferences due to sorting, it is expected that hedonic estimates are smaller than sorting estimates.

  4. While there is no theoretical proof that this procedure results in a unique equilibrium, empirically we explored a wide range of initial starting prices and verified that the model converges to the same equilibrium.

  5. These reductions in rental prices are likely a loss for capital owners.

  6. There are significant differences between a linear MWTP extrapolation and GE welfare measures. In the GE model, households relocate via sorting. Linear scaling of MWTP also ignores potential declining marginal utility.

  7. To gauge the role of unobservable public goods relative to noise, Figure 8 plots residuals from a regression of noise exposure on price residuals. We obtain price residuals from a regression of the three public goods, excluding noise, used in our sorting model on price fixed effects obtained in a separate hedonic regression. We see the expected downward sloping relationship in this figure.

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Acknowledgements

We would like to thank Fulbright Austria and the City of Vienna – Environmental Protection  for their support. We are especially thankful to Jürgen Preiss, Alexander Göltz-Morpurgo and Wolfgang Remmel for their support as well as the two anonymous reviewers and the editor for their thoughtful comments.

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Authors and Affiliations

  1. Department of Agricultural, Environmental and Development Economics, The Ohio State University, 333 Ag Admin Bldg, 2120 Fyffe Rd, Columbus, OH, 43210, USA

    H. Allen Klaiber

  2. Department of Economics and Social Sciences, University of Natural Resources and Life Sciences Vienna, Feistmantelstr. 4, 1180, Vienna, Austria

    Ulrich B. Morawetz

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Correspondence to H. Allen Klaiber.

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Appendix

Appendix

See Figs. 6, 7 and 8, and Tables 5, 6, 7 and 8.

Fig. 6
figure 6

Comparison of sample data to universe of residential buildings

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Fig. 7
figure 7

Distribution of parks in Vienna. Parks with size below 1 ha (186 parks) and parks above 30 ha (4 parks) are not shown

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Fig. 8
figure 8

Plot of % Noise > 50db on community level price residuals

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Table 5 Results of hedonic regression
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Table 6 Average yearly net income from wage earners in Euro in 2011
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Table 7 Estimation with district level income percentiles
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Table 8 MWTP for district level income estimation
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Klaiber, H.A., Morawetz, U.B. The Welfare Impacts of Large Urban Noise Reductions: Implications from Household Sorting in Vienna. Environ Resource Econ 78, 121–146 (2021). https://doi.org/10.1007/s10640-020-00527-9

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