Is Mining an Environmental Disamenity? Evidence from Resource Extraction Site Openings

Nathaly Rivera

No 2019-05, Working Papers from University of Alaska Anchorage, Department of Economics

Abstract: Extractive industries are often challenged by nearby communities due to their environmental and social impacts. If proximity to resource extraction sites represents a disamenity to households, the opening of new mines should lead to a decrease in housing prices. Using evidence from more than 6,000 new extraction sites in Chile, this study addresses whether the heavy environmental and social impacts of digging activities outweigh their local economic benefits to the housing market in emerging economies. Findings from a spatial difference-in-difference nearest-neighbor matching estimator reveal that households near mining activity get compensated with lower rental prices, mostly in places with high perceptions of exposure to environmental pollution. Further analysis suggests that this compensation is lower among new residents of mining towns, which constitutes evidence of a taste-based sorting across space. Results in this study bring to light the need of incorporating welfare effects of potential social and environmental disruptions in future studies addressing the economic impact of new mining operations.

Keywords: Extractive Industries; Mining; Environmental Valuation; Environmental Disamenities; Hedonic Models; Nearest-Neighbor Matching Estimator (search for similar items in EconPapers)
JEL-codes: Q32 Q34 Q51 Q53 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-ene, nep-env and nep-ure
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Journal Article: Is Mining an Environmental Disamenity? Evidence from Resource Extraction Site Openings (2020)
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