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

Author

Listed:
  • Guignet, Dennis
  • Jenkins, Robin
  • Ranson, Matthew
  • Walsh, Patrick J.
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.

Suggested Citation

  • Guignet, Dennis & Jenkins, Robin & Ranson, Matthew & Walsh, Patrick J., 2018. "Contamination and incomplete information: Bounding implicit prices using high-profile leaks," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 259-282.
    • Handle: RePEc:eee:jeeman:v:88:y:2018:i:c:p:259-282
    DOI: 10.1016/j.jeem.2017.12.003
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    Cited by:

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    2. Dennis Guignet & Matthew T. Heberling & Michael Papenfus & Olivia Griot, 2022. "Property Values, Water Quality, and Benefit Transfer: A Nationwide Meta-analysis," Land Economics, University of Wisconsin Press, vol. 98(2), pages 191-218.
    3. Guignet, Dennis & Jenkins, Robin R. & Belke, James & Mason, Henry, 2023. "The property value impacts of industrial chemical accidents," Journal of Environmental Economics and Management, Elsevier, vol. 120(C).
    4. Wang, Xiaohan & Yang, Mengjun, 2024. "The effect of soil pollution information disclosure on housing prices," China Economic Review, Elsevier, vol. 83(C).
    5. Lavaine, Emmanuelle, 2019. "Environmental risk and differentiated housing values: Evidence from the north of France," Journal of Housing Economics, Elsevier, vol. 44(C), pages 74-87.
    6. Emmanuelle Lavaine & Henrik Anderson, 2018. "Nitrates and Property Values," Post-Print hal-02048555, HAL.
    7. Tang, Chuan & Czajkowski, Jeffrey & Heintzelman, Martin D. & Li, Minghao & Montgomery, Marilyn, 2020. "Rail accidents and property values in the era of unconventional energy production," Journal of Urban Economics, Elsevier, vol. 120(C).
    8. Georgic, Will C. & Klaiber, Allen, 2018. "Identifying the Costs to Homeowners of Eliminating NFIP Subsidies," 2018 Annual Meeting, August 5-7, Washington, D.C. 274444, Agricultural and Applied Economics Association.
    9. Kovacs, Kent & West, Grant & Nowak, David J. & Haight, Robert G., 2022. "Tree cover and property values in the United States: A national meta-analysis," Ecological Economics, Elsevier, vol. 197(C).
    10. Guignet, Dennis & Jenkins, Robin R. & Nolte, Christoph & Belke, James, 2023. "The External Costs of Industrial Chemical Accidents: A Nationwide Property Value Study," Journal of Housing Economics, Elsevier, vol. 62(C).
    11. Georgic, Will & Klaiber, H. Allen, 2022. "Stocks, flows, and flood insurance: A nationwide analysis of the capitalized impact of annual premium discounts on housing values," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    12. Emmanuelle Lavaine, 2019. "Environmental risk and differentiated housing values," Post-Print hal-02048712, HAL.

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    More about this item

    Keywords

    Contaminated site; Groundwater; Hedonic; Meta-analysis; Property value; Underground storage tank; UST;
    All these keywords.

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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