In response to claims that the threat of environmental liability under the Superfund law deters the acquisition of potentially contaminated sites (or "brownfields") for redevelopment, the federal government has adopted programs to protect purchasers from liability. This protection may be unwarranted, however, if sellers can simply adjust property prices downward to compensate buyers for this liability. We present a model of joint and several liability under Superfund that allows us to distinguish four different reasons that this liability may discourage the purchase of brownfields. The previous literature has overlooked the effects that we identify, which all arise because a sale may increase the number of defendants in a suit to recover cleanup costs. Our analysis suggests that the brownfields problem may be more widespread than one might infer from the prior literature. Furthermore, the effects that we identify may distort not only the incentives to sell property subject to Superfund liability but also any decision of any party subject to any joint and several liability if that decision could affect the number of other defendants liable for the same harm.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11667.
Length: Date of creation: Oct 2005 Date of revision: Handle: RePEc:nbr:nberwo:11667
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Find related papers by JEL classification: Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location
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