Hedonic Wage Analysis

Abstract

For at least two hundred years, economists have argued that a competitive labor market will generate higher wages in return for less desirable working conditions, such as hazardous conditions or poorer on-the-job amenities. This expectation has lead to the development of the theory of compensating wage differentials and the estimation of hedonic wage models, the second type of hedonic model that has engaged environmental economists. In this chapter we investigate how wage differentials have been employed in valuing changes in environmental amenities.