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 Rutgers University, Department of Economics in its series Departmental Working Papers with number
200609.
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 R33 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
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