The value of disappearing beaches: A hedonic pricing model with endogenous beach width
AbstractBeach nourishment is a policy used to rebuild eroding beaches with sand dredged from other locations. Previous studies indicate that beach width positively affects coastal property values, but these studies ignore the dynamic features of beaches and the feedback that nourishment has on shoreline retreat. We correct for the resulting attenuation and endogeneity bias in a hedonic property value model by instrumenting for beach width using spatially varying coastal geological features. We find that the beach width coefficient is nearly five times larger than the OLS estimate, suggesting that beach width is a much larger portion of property value than previously thought. We use the empirical results to parameterize a dynamic optimization model of beach nourishment decisions and show that the predicted interval between nourishment projects is closer to what we observe in the data when we use the estimate from the instrumental variables model rather than OLS. As coastal communities adapt to climate change, we find that the long-term net value of coastal residential property can fall by as much as 52% when erosion rate triples and cost of nourishment sand quadruples.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 61 (2011)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/inca/622870
Beach nourishment Beach width Climate change adaptation Erosion Hedonic Morpho-economics Non-market valuation;
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- Kathrine Lausted Veie & Toke Emil Panduro, 2013. "An alternative to the standard spatial econometric approaches in hedonic house price models," IFRO Working Paper 2013/18, University of Copenhagen, Department of Food and Resource Economics.
- Klaiber, H. Allen & Gopalakrishnan, Sathya, 2012. "The Impact of Shale Exploration on Housing Values in Pennsylvania," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124368, Agricultural and Applied Economics Association.
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