An externality of groundwater depletion: land subsidence and residential property prices in Phoenix, Arizona

James Yoo and Charles Perrings

Journal of Environmental Economics and Policy, 2017, vol. 6, issue 2, 121-133

Abstract: One of the main physical effects of the depletion of aquifers is land subsidence – the lowering of the land-surface elevation as a result of groundwater overdraft. A second effect is the development of earth fissures as a result of the horizontal movement of sediments during subsidence. To determine the value of these effects we investigated the impact of land subsidence and earth fissures on residential property values in Maricopa County, Arizona. Using 82,716 arms-length property sales between 2004 and 2010, we estimated a fixed effects hedonic price model. We found that existing and future land subsidence, and earth fissures had a negative impact on the property values. The mean value of properties located in land subsidence features was lower than those located outside land subsidence features, and the disamenity associated with earth fissures was largest for properties located in land subsidence features.

Date: 2017
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DOI: 10.1080/21606544.2016.1226198

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