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An Analysis of the Impact of Multiple Environmental Goods on House Prices

Author

Listed:
  • Katherine Kiel

    () (Department of Economics, College of the Holy Cross)

  • Jennifer Bowen

    (U.S. Environmental Protection Agency)

Abstract

In order to be correctly specified, an hedonic model must include all the relevant housing, neighborhood, and environmental characteristics. If the characteristics are correlated with each other, then if they are not included in the regression the coefficients will not be correctly estimated. This paper uses a unique data set to examine how including multiple environmental indicates affects the price estimates of environmental goods. We find that when we include a single indicator as is done in the previous literature, our results are as expected. However, when we include multiple environmental indicators our results are unstable, with some coefficients having the incorrect sign. Our findings suggest that the environmental variables included might be correlated with unobserved variables other than house or neighborhood characteristics, or that the relationships between the included variables might be more complex than previously thought.

Suggested Citation

  • Katherine Kiel & Jennifer Bowen, 2002. "An Analysis of the Impact of Multiple Environmental Goods on House Prices," Working Papers 0201, College of the Holy Cross, Department of Economics.
  • Handle: RePEc:hcx:wpaper:0201
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    References listed on IDEAS

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    1. Jill J. McCluskey & Gordon C. Rausser, 2003. "Stigmatized Asset Value: Is It Temporary or Long-Term?," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 276-285, May.
    2. Farber, Stephen, 1998. "Undesirable facilities and property values: a summary of empirical studies," Ecological Economics, Elsevier, vol. 24(1), pages 1-14, January.
    3. V. Smith & Ju Huang, 1993. "Hedonic models and air pollution: Twenty-five years and counting," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(4), pages 381-394, August.
    4. 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.
    5. 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.
    6. 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..
    7. Larry Dale & James C. Murdoch & Mark A. Thayer & Paul A. Waddell, 1999. "Do Property Values Rebound from Environmental Stigmas? Evidence from Dallas," Land Economics, University of Wisconsin Press, vol. 75(2), pages 311-326.
    8. Katherine A. Kiel, 1995. "Measuring the Impact of the Discovery and Cleaning of Identified Hazardous Waste Sites on House Values," Land Economics, University of Wisconsin Press, vol. 71(4), pages 428-435.
    9. Michaels, R. Gregory & Smith, V. Kerry, 1990. "Market segmentation and valuing amenities with hedonic models: The case of hazardous waste sites," Journal of Urban Economics, Elsevier, vol. 28(2), pages 223-242, September.
    10. Clark David E. & Nieves Leslie A., 1994. "An Interregional Hedonic Analysis of Noxious Facility Impacts on Local Wages and Property Values," Journal of Environmental Economics and Management, Elsevier, vol. 27(3), pages 235-253, November.
    11. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
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    Cited by:

    1. Katherine Kiel, 2006. "Environmental Contamination and House Values," Working Papers 0601, College of the Holy Cross, Department of Economics.

    More about this item

    Keywords

    Environment; housing; amenities; hedonic pricing;

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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