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An Innovative Location Value Determination: Domain Disaggregation Additive Regression Approach

M. K. Ashenafi, V. G. Paolo

Abstract



Land, urban community’s organizing institutional resource, determines spatial organization of activities operationalized by land value. Although location is central to land value, neither the traditional econometric based nor the geo-statistical based models explicitly capture location component in land value. In account of fundamental policy implication difference either model category bears, we advocate the econometric based model. On the other hand, the often reportedly geo-statistical models efficiency, if any, is attributable to its data driven nature, and not to explicit location characterizing variables. Thus we develop an innovative land valuation approach – domain disaggregated additive model, which explicitly captures location value component. Explanatory variables have to be disaggregated according to the value component they are accounted for or because of technical implementation reason. This current case study shades light that (a) the basic value and location value components of land are mutually exclusive to each other, (b) domain disaggregation is a means of internal model improvement to the traditional regression method, and (c) the often reported geo-statistical models efficiency, if any, is attributable to its data driven nature, instead of capturing location attributes.

Keywords


land value, location value, domain-disaggregation additive model, residuality, traditional hedonic models, geostatistical model.

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