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Land-use regulations and property values in Portland, Oregon: A regression discontinuity design approach

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  • Grout, Cyrus A.
  • Jaeger, William K.
  • Plantinga, Andrew J.
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    Abstract

    Over the past two decades, the tension between public and private interests in the use of land has given rise to state-level legislation seeking to limit government controls on private property. In 2004, voters in Oregon approved Measure 37, which required payments to private landowners for reductions in the value of their property resulting from land-use regulations. The central economic question behind Measure 37 and compensation statutes adopted in other states is, what is the effect of land-use regulations on property values? Economists investigating this question have typically estimated hedonic property value models with regulations included as exogenous regressors. This approach is likely to be invalid if the parcel characteristics that determine property values also influence the government's decision about how to implement regulations. We use Regression Discontinuity Design (RDD) to study the effect of the Portland, Oregon, Urban Growth Boundary (UGB) on property values. RDD provides an unbiased estimate of the treatment effect under relatively mild conditions and is well-suited to our application because the UGB defines a sharp treatment threshold. We find a price differential on the western and southern sides of the Portland metropolitan area ranging from $30,000 to at least $140,000, but no price differential on the eastern side. Support for Measure 37 was fueled by price differences such as these among parcels subject to different regulations, but one must be careful not to view current price differentials as evidence that regulations have reduced property values.

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    Bibliographic Info

    Article provided by Elsevier in its journal Regional Science and Urban Economics.

    Volume (Year): 41 (2011)
    Issue (Month): 2 (March)
    Pages: 98-107

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    Handle: RePEc:eee:regeco:v:41:y:2011:i:2:p:98-107

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    Web page: http://www.elsevier.com/locate/regec

    Related research

    Keywords: Land values Land-use regulations Urban growth boundary Regression discontinuity design;

    References

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    1. Noelwah R. Netusil, 2005. "The Effect of Environmental Zoning and Amenities on Property Values: Portland, Oregon," Land Economics, University of Wisconsin Press, vol. 81(2).
    2. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
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    4. Fiorenza Spalatro & Bill Provencher, 2001. "An Analysis of Minimum Frontage Zoning to Preserve Lakefront Amenities," Land Economics, University of Wisconsin Press, vol. 77(4), pages 469-481.
    5. Chamblee, John F. & Dehring, Carolyn A. & Depken, Craig A., 2009. "Watershed development restrictions and land prices: Empirical evidence from southern Appalachia," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 287-296, May.
    6. Thorsnes, Paul & McMillen, Daniel P, 1998. "Land Value and Parcel Size: A Semiparametric Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 17(3), pages 233-44, November.
    7. David M. Henneberry & Richard L. Barrows, 1990. "Capitalization of Exclusive Agricultural Zoning into Farmland Prices," Land Economics, University of Wisconsin Press, vol. 66(3), pages 249-258.
    8. Daniel P. McMillen & John F. McDonald, 2002. "Land Values In A Newly Zoned City," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 62-72, February.
    9. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
    10. Steven D. Shultz & Steven J. Taff, 2004. "Implicit Prices of Wetland Easements in Areas of Production Agriculture," Land Economics, University of Wisconsin Press, vol. 80(4).
    11. James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
    12. Austin Nichols, 2007. "Causal inference with observational data," Stata Journal, StataCorp LP, vol. 7(4), pages 507-541, December.
    13. Gerrit J. Knaap, 1997. "The Price Effects of Urban Growth Boundaries in Metropolitan Portland, Oregon," Land Economics, University of Wisconsin Press, vol. 62(1), pages 26-35.
    14. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February.
    15. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    16. Cynthia J. Nickerson & Lori Lynch, 2001. "The Effect of Farmland Preservation Programs on Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 341-351.
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    Cited by:
    1. Jean-Sauveur Ay & Laure Latruffe, 2013. "The empirical content of the present value model: a survey of the instrumental uses of farmland prices," Working Papers 209441, Institut National de la Recherche Agronomique, France.
    2. Broch, Stine Wamberg & Strange, Niels & Jacobsen, Jette B. & Wilson, Kerrie A., 2013. "Farmers' willingness to provide ecosystem services and effects of their spatial distribution," Ecological Economics, Elsevier, vol. 92(C), pages 78-86.
    3. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2013. "Do Political Parties Matter for Local Land Use Policies?," CESifo Working Paper Series 4284, CESifo Group Munich.
    4. Millard-Ball, Adam, 2012. "Do city climate plans reduce emissions?," Journal of Urban Economics, Elsevier, vol. 71(3), pages 289-311.
    5. Koster, Hans R.A. & van Ommeren, Jos & Rietveld, Piet, 2012. "Bombs, boundaries and buildings," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 631-641.
    6. Dempsey, Judith A. & Plantinga, Andrew J., 2013. "How well do urban growth boundaries contain development? Results for Oregon using a difference-in-difference estimator," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 996-1007.

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