IDEAS home Printed from https://ideas.repec.org/p/ags/aaea09/49261.html
   My bibliography  Save this paper

The Value of Disappearing Beaches: A hedonic pricing model with endogenous beach width

Author

Listed:
  • Gopalakrishnan, Sathya
  • Smith, Martin D.
  • Slott, Jordan M.
  • Murray, A. Brad

Abstract

Beach nourishment is a policy used to rebuild eroding beaches with sand dredged from other locations. Previous studies indicate that beach width positively affects coastal property values, but these studies ignore the dynamic features of beaches and the feedback that nourishment has on shoreline retreat. We correct for the resulting attenuation and endogeneity bias in a hedonic property value model by instrumenting for beach width using spatially varying coastal geological features. We find that the beach width coefficient is nearly five times larger than the OLS estimate, suggesting that beach width is a much larger portion of property value than previously thought. We use the empirical results to parameterize a dynamic optimization model of beach nourishment decisions and show that the predicted interval between nourishment projects is closer to what we observe in the data when we use the estimate from the instrumental variables model rather than OLS. As coastal communities adapt to climate change, we find that the long-term net value of coastal residential property can fall by as much as 52% when erosion rate triples and cost of nourishment sand quadruples.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gopalakrishnan, Sathya & Smith, Martin D. & Slott, Jordan M. & Murray, A. Brad, 2009. "The Value of Disappearing Beaches: A hedonic pricing model with endogenous beach width," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49261, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea09:49261
    DOI: 10.22004/ag.econ.49261
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/49261/files/AAEA_637249_beach_value_SG_et_al_2009.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.49261?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Timmins, Christopher & Murdock, Jennifer, 2007. "A revealed preference approach to the measurement of congestion in travel cost models," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 230-249, March.
    2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LLC, vol. 3(1), pages 1-31, March.
    3. Kriesel, Warren & Landry, Craig E. & Keeler, Andrew, 2005. "Coastal Erosion Management from a Community Economics Perspective: The Feasibility and Efficiency of User Fees," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(2), pages 451-461, August.
    4. Smith, Martin D. & Slott, Jordan M. & McNamara, Dylan & Brad Murray, A., 2009. "Beach nourishment as a dynamic capital accumulation problem," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 58-71, July.
    5. 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..
    6. Hartman, Richard, 1976. "The Harvesting Decision When a Standing Forest Has Value," Economic Inquiry, Western Economic Association International, vol. 14(1), pages 52-58, March.
    7. Brown, Gardner M, Jr & Pollakowski, Henry O, 1977. "Economic Valuation of Shoreline," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 272-278, August.
    8. Jeffrey Pompe, 2008. "The Effect of a Gated Community on Property and Beach Amenity Valuation," Land Economics, University of Wisconsin Press, vol. 84(3), pages 423-433.
    9. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
    10. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    11. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    12. Jinyong Hahn & Jerry Hausman, 2002. "A New Specification Test for the Validity of Instrumental Variables," Econometrica, Econometric Society, vol. 70(1), pages 163-189, January.
    13. Okmyung Bin & Thomas W. Crawford & Jamie B. Kruse & Craig E. Landry, 2008. "Viewscapes and Flood Hazard: Coastal Housing Market Response to Amenities and Risk," Land Economics, University of Wisconsin Press, vol. 84(3), pages 434-448.
    14. Yohe Gary & Neumann James & Ameden Holly, 1995. "Assessing the Economic Cost of Greenhouse-Induced Sea Level Rise: Methods and Application in Support of a National Survey," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 78-97, November.
    15. George R. Parsons & Yangru Wu, 1991. "The Opportunity Cost of Coastal Land-Use Controls: An Empirical Analysis," Land Economics, University of Wisconsin Press, vol. 67(3), pages 308-316.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qiu, Yun & Gopalakrishnan, Sathya, 2018. "Shoreline defense against climate change and capitalized impact of beach nourishment," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 134-147.
    2. Craig E. Landry & Paul Hindsley, 2011. "Valuing Beach Quality with Hedonic Property Models," Land Economics, University of Wisconsin Press, vol. 87(1), pages 92-108.
    3. Megan Mullin & Martin D. Smith & Dylan E. McNamara, 2019. "Paying to save the beach: effects of local finance decisions on coastal management," Climatic Change, Springer, vol. 152(2), pages 275-289, January.
    4. Asadul Islam & Dietrich K. Fausten, 2008. "Skilled Immigration and Wages in Australia," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages 66-82, September.
    5. Corral, Leonardo R. & Schling, Maja, 2017. "The impact of shoreline stabilization on economic growth in small island developing states," Journal of Environmental Economics and Management, Elsevier, vol. 86(C), pages 210-228.
    6. Divine Ikenwilo & Anthony Scott, 2007. "The effects of pay and job satisfaction on the labour supply of hospital consultants," Health Economics, John Wiley & Sons, Ltd., vol. 16(12), pages 1303-1318.
    7. O. Ashton Morgan & Stuart E. Hamilton, 2009. "Disentangling Access and View Amenities in Access-restricted Coastal Residential Communities," Working Papers 09-10, Department of Economics, Appalachian State University.
    8. Doko Tchatoka, Firmin & Dufour, Jean-Marie, 2020. "Exogeneity tests, incomplete models, weak identification and non-Gaussian distributions: Invariance and finite-sample distributional theory," Journal of Econometrics, Elsevier, vol. 218(2), pages 390-418.
    9. Matthew Higgins & Andrew Young & Daniel Levy, 2009. "Federal, state, and local governments: evaluating their separate roles in US growth," Public Choice, Springer, vol. 139(3), pages 493-507, June.
    10. Martin Strieborny & Madina Kukenova, 2016. "Investment in Relationship-Specific Assets: Does Finance Matter?," Review of Finance, European Finance Association, vol. 20(4), pages 1487-1515.
    11. Barry Eichengreen & David Leblang, 2008. "Democracy And Globalization," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 289-334, November.
    12. Grant Hillier & Giovanni Forchini, 2004. "Ill-posed Problems and Instruments' Weakness," Econometric Society 2004 Australasian Meetings 357, Econometric Society.
    13. Athanasios Votsis & Adriaan Perrels, 2016. "Housing Prices and the Public Disclosure of Flood Risk: A Difference-in-Differences Analysis in Finland," The Journal of Real Estate Finance and Economics, Springer, vol. 53(4), pages 450-471, November.
    14. Monique DANTAS & Frédéric GASCHET & Guillaume POUYANNE, 2010. "Regulatory zoning and coastal housing prices: a bayesian hedonic approach (In French)," Cahiers du GREThA (2007-2019) 2010-12, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    15. Jeanne DACHARY-BERNARD & Sandrine LYSER & Frédéric GASCHET & Guillaume POUYANNE & Stéphane VIROL, 2011. "Real Estate and Land Values on the shoreline: a transaction-level analysis (In French)," Cahiers du GREThA (2007-2019) 2011-07, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    16. Meri Davlasheridze & Qin Fan, 2019. "Valuing Seawall Protection in the Wake of Hurricane Ike," Economics of Disasters and Climate Change, Springer, vol. 3(3), pages 257-279, October.
    17. Roman Horvath, 2005. "Exchange rate variability, pressures and optimum currency area criteria: some empirical evidence from the 1990s," Applied Economics Letters, Taylor & Francis Journals, vol. 12(15), pages 919-922.
    18. Richard Startz & Charles Nelson & Eric Zivot, 1999. "Improved Inference for the Instrumental Variable Estimator," Working Papers 0039, University of Washington, Department of Economics.
    19. Dufour, Jean-Marie & Taamouti, Mohamed, 2007. "Further results on projection-based inference in IV regressions with weak, collinear or missing instruments," Journal of Econometrics, Elsevier, vol. 139(1), pages 133-153, July.
    20. Thorsten Beck, 2009. "The Econometrics of Finance and Growth," Palgrave Macmillan Books, in: Terence C. Mills & Kerry Patterson (ed.), Palgrave Handbook of Econometrics, chapter 25, pages 1180-1209, Palgrave Macmillan.

    More about this item

    Keywords

    Environmental Economics and Policy; Resource/Energy Economics and Policy;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea09:49261. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.