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Estimation of Perceived Risk and Its Effect on Property Values

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  • Jill J. McCluskey
  • Gordon C. Rausser

Abstract

A dynamic, discrete-time model is estimated in order to analyze the evolution of perceived risk around a hazardous waste site and its effect on property values. Residential property values are modeled as a function of housing attributes and perceived risk from a nearby hazardous waste site using an hedonic-price framework. Perceived risk enters the model as a state equation, which includes a media coverage variable. Results indicate that media coverage and high prior risk perception increase current perceived risk. Increased perceived risk surrounding the hazardous waste site, in turn, lowers property values.

Suggested Citation

  • Jill J. McCluskey & Gordon C. Rausser, 2001. "Estimation of Perceived Risk and Its Effect on Property Values," Land Economics, University of Wisconsin Press, vol. 77(1), pages 42-55.
  • Handle: RePEc:uwp:landec:v:77:y:2001:i:1:p:42-55
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    Cited by:

    1. Lipscomb, Clifford & Wang, Yongsheng & Kilpatrick, Sarah J., 2012. "Unconvensional Shale Gas Development and Real Estate Valuation Issues," The Review of Regional Studies, Southern Regional Science Association, vol. 42(2), pages 161-175, Summer.
    2. Jakus, Paul M & Shaw, W Douglass, 2003. "Perceived Hazard and Product Choice: An Application to Recreational Site Choice," Journal of Risk and Uncertainty, Springer, vol. 26(1), pages 77-92, January.
    3. de Koning, Koen & Filatova, Tatiana & Bin, Okmyung, 2017. "Bridging the Gap Between Revealed and Stated Preferences in Flood-prone Housing Markets," Ecological Economics, Elsevier, vol. 136(C), pages 1-13.
    4. McCluskey, Jill J. & Rausser, Gordon C., 2003. "Hazardous waste sites and housing appreciation rates," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 166-176, March.
    5. Glenn C. Blomquist, 2004. "Self-Protection and Averting Behavior, Values of Statistical Lives, and Benefit Cost Analysis of Environmental Policy," Review of Economics of the Household, Springer, vol. 2(1), pages 89-110, March.
    6. Huang, Ju-Chin & Haab, Timothy C. & Whitehead, John C., 2001. "Absolute Versus Relative Risk Perceptions: An Application To Economic Values Of Seafood Safety," 2001 Annual meeting, August 5-8, Chicago, IL 20731, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2010. "The Life Satisfaction Approach to Environmental Valuation," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 139-160, October.
    8. Joseph A. Herriges & Silvia Secchik & JBruce A. Babcock, 2005. "Living with Hogs in Iowa: The Impact of Livestock Facilities on Rural Residential Property Values," Land Economics, University of Wisconsin Press, vol. 81(4).
    9. Akinjare, Omolade Adedoyin & Dr. Olusegun Adebayo Ogunba & Dr. Caleb Abiodun Ayedun & Iroham, Chukwuemeka Osmond, 2011. "Perception of Disamenity Hazards on Residential Housing Values in Lagos, Nigeria," Far East Journal of Marketing and Management, Far East Research Centre, vol. 1(1), pages 1-09, December.
    10. repec:oup:revage:v:24:y:2002:i:2:p:528-539. is not listed on IDEAS
    11. Kaltsas, Ioannis K. & Bosch, Darrell J. & McGuirk, Anya M., 2008. "Residential Land Values in Urbanizing Areas," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(02), August.
    12. Shawn J. McCoy & Randall P. Walsh, 2014. "W.U.I. on Fire: Risk, Salience & Housing Demand," NBER Working Papers 20644, National Bureau of Economic Research, Inc.
    13. Quagrainie, Kwamena K. & McCluskey, Jill J. & Loureiro, Maria L., 2001. "Reputation And State Commodity Promotion: The Case Of Washington Apples," 2001 Annual meeting, August 5-8, Chicago, IL 20592, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Ruth Hill & Angelino Viceisza, 2012. "A field experiment on the impact of weather shocks and insurance on risky investment," Experimental Economics, Springer;Economic Science Association, vol. 15(2), pages 341-371, June.
    15. Qinna Zhao & Robert A. Simons & Zhong Fen, 2016. "The Effect of Three Incineration Plants on Residential Property Values in Hangzhou, China," International Real Estate Review, Asian Real Estate Society, vol. 19(4), pages 515-546.
    16. Hill, Ruth Vargas & Viceisza, Angelino, 2010. "An experiment on the impact of weather shocks and insurance on risky investment," IFPRI discussion papers 974, International Food Policy Research Institute (IFPRI).
    17. Bin, Okmyung & Landry, Craig E., 2013. "Changes in implicit flood risk premiums: Empirical evidence from the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 361-376.
    18. Chau-Sa Ho & Diane Hite, 2008. "The benefit of environmental improvement in the southeastern United States: Evidence from a simultaneous model of cancer mortality, toxic chemical releases and house values," Papers in Regional Science, Wiley Blackwell, vol. 87(4), pages 589-604, November.
    19. Beckmann, Michael & Cornelissen, Thomas & Schauenberg, Bernd, 2009. "Fixed-term Employment, Work Organization and Job Satisfaction : Evidence from German Individual-Level Data," Working papers 2009/08, Faculty of Business and Economics - University of Basel.
    20. Shih Hsiung Chou & Shih Hung Chih, 2001. "Metropolis: Impact Assessment of Flood Risk on Housing Property Market in Taipei," ERES eres2001_132, European Real Estate Society (ERES).
    21. Huang, Ju-Chin & Haab, Timothy C. & Whitehead, John C., 2004. "Risk Valuation in the Presence of Risky Substitutes: An Application to Demand for Seafood," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(01), pages 213-228, April.
    22. Ho, Sa Chau & Hite, Diane, 2004. "Economic Impact Of Environmental Health Risks On House Values In Southeast Region: A County-Level Analysis," 2004 Annual meeting, August 1-4, Denver, CO 19921, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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