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Hedonic valuation of odor nuisance using field measurements, a case study of an animal waste processing facility in Flanders

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  • Eyckmans, Johan

    ()
    (Hogeschool-Universiteit Brussel (HUB), Belgium)

  • De Jaeger, Simon

    ()
    (Hogeschool-Universiteit Brussel (HUB), Belgium)

  • Rousseau, Sandra

    ()
    (Hogeschool-Universiteit Brussel (HUB), Belgium)

Abstract

In this paper we estimate the external cost caused by odor from an animal waste processing facility in Flanders using new odor measures based on field measurements. We compare three different ways of incorporating odor nuisance indicators into the model: distance to the odor source, continuous odor measures, and a dummy variable approach comparable to the standard procedure in hedonic price analysis of noise pollution. We argue that the dummy variable approach is best suited to estimate the external costs and we test these specifications for a dataset of about 1400 observations of house sales transaction between 2004 and 2008. Results show that houses subject to moderate and severe odor nuisance sell at a discount of about 5% and 12% respectively compared to houses without odor nuisance. The overall capitalized external cost of the odor exposure for the area of the case study was estimated to range between 6 and 56 million euro, with a central estimate of about 31 million euro. This estimate proves to be very stable over different model specifications. Compared to 1991, the external cost has almost been cut by half as a result of odor emission reducing measures taken by the facility.

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Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2011/19.

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Length: 26 pages
Date of creation: Nov 2011
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Handle: RePEc:hub:wpecon:201119

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Web page: http://research.hubrussel.be
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Keywords: valuation of environmental externalities; odor nuisance; hedonic price method; spatial econometrics;

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  1. Jeffrey P. Cohen & Cletus C. Coughlin, 2008. "Spatial Hedonic Models Of Airport Noise, Proximity, And Housing Prices," Journal of Regional Science, Wiley Blackwell, vol. 48(5), pages 859-878.
  2. Herriges, Joseph A. & Secchi, Silvia & Babcock, Bruce A., 2003. "Living with Hogs in Iowa: The Impact of Livestock Facilities on Rural Residential Property Values," Staff General Research Papers 10683, Iowa State University, Department of Economics.
  3. Henrik Andersson & Lina Jonsson & Mikael Ögren, 2010. "Property Prices and Exposure to Multiple Noise Sources: Hedonic Regression with Road and Railway Noise," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(1), pages 73-89, January.
  4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  5. G�ran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
  6. V. Smith & Ju Huang, 1993. "Hedonic models and air pollution: Twenty-five years and counting," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(4), pages 381-394, August.
  7. Arthur C. Nelson & John Genereux & Michelle Genereux, 1992. "Price Effects of Landfills on House Values," Land Economics, University of Wisconsin Press, vol. 68(4), pages 359-365.
  8. Raymond B. Palmquist & Fritz M. Roka & Tomislav Vukina, 1997. "Hog Operations, Environmental Effects, and Residential Property Values," Land Economics, University of Wisconsin Press, vol. 73(1), pages 114-124.
  9. Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819 Elsevier.
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