To Sell Or Not To Sell: The Impacts of Pollution on Home Transactions
AbstractNumerous nonmarket valuation studies have examined the impacts of environmental commodities on house prices, but little attention has been given to how shifts in these commodities affect the occurrence of home transactions, and the resulting welfare implications. Using a novel theoretical framework and an empirical analysis of homes impacted by petroleum releases from underground storage tanks, this paper demonstrates that changes in environmental quality can significantly impact a household’s decision to sell their home, and that this change in behavior has important implications towards theoretical welfare measures and empirical estimates. A discrete time duration model is estimated using a panel of single-family homes from 2000 to 2007. The dependent variable is the annual occurrence of a sale at each individual home. I find that contamination and cleanup activities in close proximity significantly impact the probability that a home is sold. Most striking is that this probability is reduced by about 50% during ongoing cleanup. This finding is most pronounced among lower quality homes and where an exposure pathway is present.
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Bibliographic InfoPaper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 201401.
Length: 62 pages
Date of creation: Jan 2014
Date of revision: Jan 2014
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housing market; property transactions; discrete time duration model ; hedonic analysis; leaking underground storage tanks; groundwater contamination;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-01-24 (All new papers)
- NEP-ENV-2014-01-24 (Environmental Economics)
- NEP-URE-2014-01-24 (Urban & Real Estate Economics)
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