Towards the Measurement of Spatial Welfare

This paper develops a framework for assessing the welfare eects of the cap-italisation of the value of environmental quality in the price for land, combining elements from environmental and spatial economics on the basis of equilibrium considerations for population games. Its main contribution to environmental eco-nomics consists of introducing a consistent concept for spatial welfare. Following the introduction of estimable locational sorting models in valuation methodol-ogy, the relationship between the theoretical underpinnings of the hedonic pricing model and the bid rent concept in urban economics is re-examined. This is done along the denition of a general equilibrium willingness to pay (GE-WTP) that is at the heart of most applications of locational sorting models in environmen-tal economics. A GE-WTP should be able to value non-marginal changes in a spatially explicit distribution of local public goods. Commonly, such a GE-WTP is derived as a Hicksian WTP adjusted for endogenous land prices. This paper oers an alternative interpretation. For a GE-WTP, endogenous prices are typ