Saturday, May 18, 2013

What Do Property Values Really Tell Us? A Hedonic Study of Underground Storage Tanks

Hedonic property value models are widely used but are susceptible to potentially invalid conjectures based on the assumed measure of environmental quality. This paper focuses on an application where this is of particular concern: leaking underground storage tanks. I estimate a hedonic model using quasi-experimental and spatial econometric techniques. Similar to previous studies, I examine how house prices vary with distance to the disamenity. This approach yields little evidence that prices are adversely impacted. However, to better measure risks I utilize home-specific data on groundwater well tests and correspondence from regulators, and find an 11% depreciation when households are well informed.
 A horizontal cylindrical steel tank with a factory applied coating and galvanic anodes
by Dennis Guignet, Research Economist, U.S. Environmental Protection Agency, National Center for Environmental Economics
Land Economics http://le.uwpress.org/
Volume 89, Number 2; May 1, 2013; pages 211-22
A full 2012 version of this paper is available free of charge at http://tinyurl.com/aye9hnl

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