Green Price Indices

This paper suggests two theoretically consistent and empirically tractable ways that a cost-ofliving index can be expanded to include the environment and other public goods. In addition, it presents an empirical illustration of such an index for Los Angeles, California, incorporating air quality and other spatially varying public goods using a hedonic model. The results indicate that the required information can be recovered and that including public goods can make a noticeable difference in the index.