Hedonic house price models that incorporate environmental variables are becoming more and more popular, because a substantial body of research empirically confirms that consumers are willing to pay for environmental goods. The problem that arises when environmental information is included in such kind of models is that there is a mismatch between the spatial ‘support’ for the environmental measured variables and the property prices. In the literature, the usual solution to this problem is the elaboration of an environmental quality index (EQI), and then interpolating it (preferably kriging) in the locations where house prices are available and pollutants have not been measured. But in this paper it is proposed the inverse procedure, i.e. to interpolate (preferably cokriging) the environmental variables and, subsequently, elaborate an EQI, because the estimation variance is lesser. As far as we know, there is no research following this proposal. Both options are empirically compared in Madrid City (Spain).

1. FULLTEXT: How to include environmental quality kriged indexes in hedonic housing price models, Microsoft Office Document, 1.4MB

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