Regulation and Capitalization of Environmental Amenities: Evidence from the Toxic Release Inventory in Massachusetts
Environmental regulation in the United States has undergone a slow evolution from command and control strategies towards market-based regulations. One such innovation is the Toxics Release Inventory (TRI), a regulation that requires polluting firms to publicly disclose information about their toxic emissions. The basic tenet of this regulation is that it corrects for informational asymmetries between polluters and households, allowing communities to pressure polluters to decrease their emissions. Policy-makers have judged the TRI a tremendous success, as national releases declined by 43% between 1988 and 1999. Yet many of the fundamental problems which are known to lead to the classic failure of the Coase theorem (such as high transaction costs and difficulties in organizing) cast doubt on the effectiveness of disclosure rules, alone, to lead to an efficient outcome in the case of pollution. We use an event study methodology with high-quality data on house prices and other local attributes to assess the extent to which the public values changes in toxic releases and thus the success of TRI. Our major findings include: (1) declines in toxic releases appear unrelated to any political economy variables that might lead to public activism; (2) initial information released under TRI had no significant effect on the distribution of house prices; and (3) house prices show no significant impact of declines in reported toxic releases over time. Standard errors are small enough that we can reject the hypothesis that large declines in toxic releases lead to more than a 0.5% increase in house prices. These results also hold when we control for differences in the availability of information on TRI and the possible effect of expectations. Our findings cast doubt on the ability of the public to process complex information on hazardous emissions and support the Coase theorem in that right-to-know laws such as TRI may not be the most effective form of environmental regulation. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 85 (2003)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Karl E. Case & Robert J. Shiller, 1987.
"Prices of Single Family Homes Since 1970: New Indexes for Four Cities,"
Cowles Foundation Discussion Papers
851, Cowles Foundation for Research in Economics, Yale University.
- Karl E. Case & Robert J. Shiller, 1987. "Prices of single-family homes since 1970: new indexes for four cities," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 45-56.
- Karl E. Case & Robert J. Shiller, 1987. "Prices of Single Family Homes Since 1970: New Indexes for Four Cities," NBER Working Papers 2393, National Bureau of Economic Research, Inc.
- Bradbury, Katharine L. & Mayer, Christopher J. & Case, Karl E., 2001. "Property tax limits, local fiscal behavior, and property values: evidence from Massachusetts under Proposition," Journal of Public Economics, Elsevier, vol. 80(2), pages 287-311, May.
- Small, Kenneth A, 1975. "Air Pollution and Property Values: Further Comment," The Review of Economics and Statistics, MIT Press, vol. 57(1), pages 105-07, February.
- Gyourko, Joseph & Kahn, Matthew & Tracy, Joseph, 1999. "Quality of life and environmental comparisons," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 37, pages 1413-1454 Elsevier.
- Karl E. Case & Christopher J. Mayer, 1995.
"Housing Price Dynamics Within a Metropolitan Area,"
NBER Working Papers
5182, National Bureau of Economic Research, Inc.
- Kenneth Y. Chay & Michael Greenstone, 1998.
"Does Air Quality Matter? Evidence from the Housing Market,"
NBER Working Papers
6826, National Bureau of Economic Research, Inc.
- Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
- Polinsky, A Mitchell & Shavell, Steven, 1975. "The Air Pollution and Property Value Debate," The Review of Economics and Statistics, MIT Press, vol. 57(1), pages 100-104, February.
- Freeman, A Myrick, III, 1974. "Air Pollution and Property Values: A Further Comment," The Review of Economics and Statistics, MIT Press, vol. 56(4), pages 554-56, November.
- Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
- Freeman, A Myrick, III, 1971. "Air Pollution and Property Values: A Methodological Comment," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 415-16, November.
- Mendelsohn, Robert & Hellerstein, Daniel & Huguenin, Michael & Unsworth, Robert & Brazee, Richard, 1992. "Measuring hazardous waste damages with panel models," Journal of Environmental Economics and Management, Elsevier, vol. 22(3), pages 259-271, May.
- Kiel Katherine A. & McClain Katherine T., 1995. "House Prices during Siting Decision Stages: The Case of an Incinerator from Rumor through Operation," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 241-255, March.
- Kohlhase, Janet E., 1991. "The impact of toxic waste sites on housing values," Journal of Urban Economics, Elsevier, vol. 30(1), pages 1-26, July.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Mitchell Polinsky, A. & Shavell, Steven, 1976. "Amenities and property values in a model of an urban area," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 119-129.
- Hamilton James T., 1995. "Pollution as News: Media and Stock Market Reactions to the Toxics Release Inventory Data," Journal of Environmental Economics and Management, Elsevier, vol. 28(1), pages 98-113, January.
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:85:y:2003:i:3:p:693-708. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Pollock-Nelson)
If references are entirely missing, you can add them using this form.