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Contamination and incomplete information: Bounding implicit prices using high-profile leaks

Dennis Guignet, Robin Jenkins, Matthew Ranson and Patrick Walsh ()

Journal of Environmental Economics and Management, 2018, vol. 88, issue C, 259-282

Abstract: Incomplete information can lead households to underprice environmental disamenities in the housing market. To bound the true implicit prices, researchers sometimes study high-profile cases involving significant media and community attention. However, prior research finds that high-profile cases may lead to “stigma” effects that can confound interpretation of the results. This study compares these opposing effects at sixteen of the highest profile underground storage tank releases across the United States over the last thirty years. Using covariate matching and difference-in-differences hedonic regressions, we estimate the change in housing values around each site. We then conduct a cross-site meta-analysis to estimate the average treatment effects. We find an average housing price depreciation of 2–6% upon discovery of a release, which is an upper bound on the implicit price of contamination at more typical sites. Following cleanup, we find a housing price appreciation of a similar magnitude, suggesting that even in high-profile cases, surrounding neighborhoods do not experience persistent stigma.

Keywords: Contaminated site; Groundwater; Hedonic; Meta-analysis; Property value; Underground storage tank; UST (search for similar items in EconPapers)
JEL-codes: Q24 Q51 Q53 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jeem.2017.12.003

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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