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The Impact of Shale Exploration on Housing Values in Pennsylvania

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  • Klaiber, H. Allen
  • Gopalakrishnan, Sathya

Abstract

Horizontal drilling and hydraulic fracturing processes to extract shale gas have raised concerns among local residents over the safety of these new drilling techniques. To assess whether potential negative externalities associated with shale gas exploration are capitalized into surrounding homeowners property values, we estimate a hedonic model combining data on 3,464 housing sales occurring between 2008 and 2010 in a suburban/rural county south of Pittsburgh, PA which experienced large numbers of new horizontal Marcellus wells beginning in late 2008. Using hedonic methods, we find a negative and significant impact to households in close proximity both spatially and temporally to this activity. Further we find that this negative impact disproportionately accrues to homeowners near additional agricultural areas and on well water. In all cases, the negative impact appears relatively short-lived

Suggested Citation

  • Klaiber, H. Allen & Gopalakrishnan, Sathya, 2012. "The Impact of Shale Exploration on Housing Values in Pennsylvania," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124368, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:124368
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    File URL: http://purl.umn.edu/124368
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    References listed on IDEAS

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    3. Smith, V. Kerry & Poulos, Christine & Kim, Hyun, 2002. "Treating open space as an urban amenity," Resource and Energy Economics, Elsevier, vol. 24(1-2), pages 107-129, February.
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    5. Joshua K. Abbott & H. Allen Klaiber, 2011. "An Embarrassment of Riches: Confronting Omitted Variable Bias and Multi-Scale Capitalization in Hedonic Price Models," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1331-1342, November.
    6. Leggett, Christopher G. & Bockstael, Nancy E., 2000. "Evidence of the Effects of Water Quality on Residential Land Prices," Journal of Environmental Economics and Management, Elsevier, vol. 39(2), pages 121-144, March.
    7. Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819 Elsevier.
    8. Gopalakrishnan, Sathya & Smith, Martin D. & Slott, Jordan M. & Murray, A. Brad, 2011. "The value of disappearing beaches: A hedonic pricing model with endogenous beach width," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 297-310, May.
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    10. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-675, November.
    11. Geoghegan, Jacqueline & Wainger, Lisa A. & Bockstael, Nancy E., 1997. "Spatial landscape indices in a hedonic framework: an ecological economics analysis using GIS," Ecological Economics, Elsevier, vol. 23(3), pages 251-264, December.
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    Cited by:

    1. Muehlenbachs, Lucija & Spiller, Elisheba & Timmins, Christopher, "undated". "The Housing Market Impacts of Shale Gas Development," Discussion Papers dp-13-39-rev, Resources For the Future.
    2. Lucija Muehlenbachs & Elisheba Spiller & Christopher Timmins, 2015. "The Housing Market Impacts of Shale Gas Development," American Economic Review, American Economic Association, vol. 105(12), pages 3633-3659, December.
    3. Lucija Muehlenbachs & Elisheba Spiller & Christopher Timmins, 2012. "Shale Gas Development and Property Values: Differences Across Drinking Water Sources," Working Papers 12-14, Duke University, Department of Economics.
    4. Weber, Jeremy G., 2014. "A decade of natural gas development: The makings of a resource curse?," Resource and Energy Economics, Elsevier, vol. 37(C), pages 168-183.

    More about this item

    Keywords

    Shale gas; Housing values; Risk perceptions; Hedonic; Environmental Economics and Policy; Land Economics/Use; Resource /Energy Economics and Policy; Q51; Q52; R21;

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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