The Impact of Wind Power Projects on Residential Property Values ...

4.2. Model Form
A standard semi-log functional form is used for the hedonic models (as was discussed in Section
2.1), where the dependent variable (sales price in inflation-adjusted 1996 dollars) is transformed
to its natural log form and the independent variables (e.g., square feet and acres) are not
transformed. Using this form to examine the effect that views <strong>of</strong>, and distance to, wind facilities
have on sales prices, the following basic model is estimated:
(1)
0 1 2 3 4 5
ln P N S X VIEW DISTANCE
s k v d
where
P represents the inflation-adjusted sales price,
N is the spatially weighted neighbors’ predicted sales price,
S is the vector <strong>of</strong> s Study Area fixed effects variables (e.g., WAOR, OKCC, etc.),
X is a vector <strong>of</strong> k home and site characteristics (e.g., acres, square feet, number <strong>of</strong> bathrooms,
condition <strong>of</strong> the home, age <strong>of</strong> home, VISTA, etc.),
VIEW is a vector <strong>of</strong> v categorical view <strong>of</strong> turbine variables (e.g., MINOR, MODERATE, etc.),
DISTANCE is a vector <strong>of</strong> d categorical distance to turbine variables (e.g., less than 3000 feet,
between one and three miles, etc.),
0 is the constant or intercept across the full sample,
1 is a parameter estimate for the spatially weighted neighbor’s predicted sales price,
2 is a vector <strong>of</strong> s parameter estimates for the study area fixed effects as compared to homes sold
in the Washington/Oregon (WAOR) study area,
3 is a vector <strong>of</strong> k parameter estimates for the home and site characteristics,
4 is a vector <strong>of</strong> v parameter estimates for the VIEW variables as compared to homes sold with
no view <strong>of</strong> the turbines,
5 is a vector <strong>of</strong> d parameter estimates for the DISTANCE variables as compared to homes sold
situated outside <strong>of</strong> five miles, and
is a random disturbance term.
As such, this model, and all subsequent hedonic models, has four primary groups <strong>of</strong> parameters:
variables <strong>of</strong> interest, spatial adjustments, study-area fixed effects, and home and site
characteristics.
<strong>The</strong> variables <strong>of</strong> interest, VIEW and DISTANCE, are the focus <strong>of</strong> this study, and allow the
investigation <strong>of</strong> the presence <strong>of</strong> Area, Scenic Vista, and Nuisance Stigmas. <strong>The</strong>se variables were
defined in Section 3, and are summarized in Table 8. Both VIEW and DISTANCE appear in the
model together because a home’s value may be affected in part by the magnitude <strong>of</strong> the view <strong>of</strong>
the wind turbines, and in part by the distance from the home to those turbines, and both variables
appear in the Base Model as ordered categorical values. <strong>The</strong> coefficients associated with these
two vectors <strong>of</strong> variables ( 4 and 5 ) represent the marginal impact <strong>of</strong> views <strong>of</strong>, and distances to,
wind turbines on sales prices, as compared to a “reference” category <strong>of</strong> residential transactions,
and should be ordered monotonically from low to high. 51 This form <strong>of</strong> variable was used to
51 “Reference category” refers to the subset <strong>of</strong> the sample to which other observations are compared, and is pertinent
when using categorical or “fixed effect” variables.
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