A note on the use of property values in estimating marginal willingness to pay for environmental quality

The principle purpose of this paper is to discuss the theoretical background of the use of property values in estimating damage function. In the first part of the paper a general equilibrium model is constructed in which environmental quality differences are capitalized into land rents. In the second part of the paper some of the assumptions needed for this result are scrutinized, and it is found that they are hardly realistic. The main conclusion is, thus, that the study of property values cannot give viable estimates of the marginal willingness to pay for environmental quality.