An economic valuation of natural land areas in Germany

Abstract

The objective of this paper is to contribute to the environmental valuation literature by providing a comprehensive assessment of the economic value of land cover in Germany using two different approaches; the subjective well-being approach and the hedonic pricing approach. The empirical analysis is based on socio-economic information of the SOEP and detailed land cover information for more than 9000 municipalities provided by the IÖR covering the period 2006 to 2010. Multilevel regressions of life-satisfaction and housing rents on amongst others land cover information (including urban, cultivated, natural and protected areas) are conducted. The analysis accounts for several important issues such as time-invariant factors using panel estimation techniques, endogeneity of income and land cover information and spatial relationships of land cover. From the estimated relationships the (implicit) marginal willingness to pay (MWTP) estimates for the different categories of land areas are derived. A comparison with estimated values from the environmental valuation literature and its implications is provided.