Many communities are concerned about the reuse of potentially contaminated land ("brownfields") and believe that environmental liability is a hindrance to redevelopment. However, with land price adjustments, liability might not impede the reuse of this land. Existing literature has found price reductions in response to liability, but few studies have looked for an effect on vacancies. This paper studies variations in state liability rules -- specifically, strict liability and joint and several liability -- that affect the level and distribution of expected private cleanup costs. It explores the effects of this variation on industrial land prices and vacancy rates and on reported brownfields in a panel of cities across the United States. In the estimated equations, joint and several liability reduces land prices and increases vacancy rates in central cities. Neither a price nor quantity effect is estimated from strict liability. The results suggest that liability is at least partly capitalized, but does still deter redevelopment.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
15017.
Length: Date of creation: May 2009 Date of revision: Handle: RePEc:nbr:nberwo:15017
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Find related papers by JEL classification: K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns
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