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Understanding the Solar Home price premium: Electricity generation and “Green” social status

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  • Dastrup, Samuel R.
  • Graff Zivin, Joshua
  • Costa, Dora L.
  • Kahn, Matthew E.

Abstract

This study uses a large sample of homes in the San Diego area and Sacramento, California area to provide some of the first capitalization estimates of the sales value of homes with solar panels relative to comparable homes without solar panels. Although the residential solar home market continues to grow, there is little direct evidence on the market capitalization effect. Using both hedonics and a repeat sales index approach we find that solar panels are capitalized at roughly a 3.5% premium. This premium is larger in communities with a greater share of college graduates and of registered Prius hybrid vehicles.

Suggested Citation

  • Dastrup, Samuel R. & Graff Zivin, Joshua & Costa, Dora L. & Kahn, Matthew E., 2012. "Understanding the Solar Home price premium: Electricity generation and “Green” social status," European Economic Review, Elsevier, vol. 56(5), pages 961-973.
  • Handle: RePEc:eee:eecrev:v:56:y:2012:i:5:p:961-973
    DOI: 10.1016/j.euroecorev.2012.02.006
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    Keywords

    Solar panels; Real estate prices; Environmentalism;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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