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The value of disappearing beaches: A hedonic pricing model with endogenous beach width

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  • Gopalakrishnan, Sathya
  • Smith, Martin D.
  • Slott, Jordan M.
  • Murray, A. Brad
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    Abstract

    Beach 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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    File URL: http://www.sciencedirect.com/science/article/B6WJ6-51PH18F-1/2/779c6d1a7aa24cf171434d859c8941dd
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

    Volume (Year): 61 (2011)
    Issue (Month): 3 (May)
    Pages: 297-310

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    Handle: RePEc:eee:jeeman:v:61:y:2011:i:3:p:297-310

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    Web page: http://www.elsevier.com/locate/inca/622870

    Related research

    Keywords: Beach nourishment Beach width Climate change adaptation Erosion Hedonic Morpho-economics Non-market valuation;

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    Cited by:
    1. Paul Hindsley & Stuart Hamilton & O. Morgan, 2013. "Gulf Views: Toward a Better Understanding of Viewshed Scope in Hedonic Property Models," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 489-505, October.
    2. Jerome Massiani, 2013. "How to Value the Benefits of a Recreational Area? A Cost-Benefit Analysis of the Conversion of a Brownfield to a Public Beach in Muggia (Italy)," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 5(1), pages 86-102, June.
    3. 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.
    4. 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.

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