Ex-ante evaluation of an urban transformation through hedonic prices : the case study of the 6 Orange Metro line in Sao Paulo

Large cities are in a constant process of change seeking to solve the challenges that their residents face on a daily basis. A considerable quantity of money is invested in large urban interventions so that, through them, the life of the population improves. Because of public economic resources are scarce, planners need make decisions about how, where and when to invest those resources. To support decisions of this character, several methods for the assessment of urban transformations exist and, through them, externalities, both negative and positive, can be measured in monetary values. The scope of this dissertation is to analyze the benefits, and eventually some negative externalities, accruing from a big urban transformation running in Sao Paulo, the construction of the new metro line 6-Orange. Such intervention will certainly impact the Real Estate market of the areas that will be served by the new line. This analysis will be based on the robust Hedonic Prices Method and, through the expected residential Real Estate valorization, the social benefits for the population will be estimated in monetary value. Since the works are still in the very beginning and the new metro line is expected to be delivered only in 2021, the analysis carried out is essentially ex-ante. In the first chapter, it’ll be presented theories, principles and conditions related to location choices and the emergence of land rent. In the second one, the most relevant concepts of the theory of public economics, in special some welfare economics theorems will be shown. The third chapter is dedicated to the presentation of the Hedonic Prices, methodology chosen in order to assess the urban transformation. The chapter four will present the object of analysis of this dissertation: the New Metro Line 6-Orange in Sao Paulo. Furthermore, all the models, the data collection and treatment, the results, the simulation phase and the final economic assessment will be part of this section. Finally, the chapter five will be dedicated to the final discussion and conclusion.