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Environmental Contamination and House Values: A Study of Market Adjustment

  • Katherine Kiel


    (Department of Economics, College of the Holy Cross)

In many communities throughout the United States, contaminated sites are identified and addressed by the Environmental Protection Agency (EPA). In each of these communities, the EPA presents a plan of action and provides the community with information about progress being made. Does the housing market adjust quickly after announcements by EPA concerning the existence and toxicity of Superfund sites? Other studies have shown that the levels of house prices fall when people suspect there is a problem, and again when the EPA announces that the site is toxic (e.g. Kiel, 1995), but how can we tell when or if the market has completely adjusted to the existence of such a site? If the site is always perceived as an externality, then the coefficient on distance from the house to the site in the hedonic regression on house values should remain statistically significant and negative. Thus merely looking at the coefficient does not aid in determining when, or if, the market has cleared.

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Paper provided by College of the Holy Cross, Department of Economics in its series Working Papers with number 0607.

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Length: 17 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:hcx:wpaper:0607
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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. Greenberg, M & Hughes, J, 1992. "The Impact of Hazardous Waste Superfund Sites on the Value of Houses Sold in New Jersey," The Annals of Regional Science, Springer, vol. 26(2), pages 147-53, June.
  3. 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.
  4. McCluskey, Jill Jennifer & Rausser, Gordon C, 2000. "Hazardous waste sites and housing appreciation rates," CUDARE Working Paper Series 906, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  5. Farber, Stephen, 1998. "Undesirable facilities and property values: a summary of empirical studies," Ecological Economics, Elsevier, vol. 24(1), pages 1-14, January.
  6. Kiel Katherine A. & McClain Katherine T., 1995. "The Effect of an Incinerator Siting on Housing Appreciation Rates," Journal of Urban Economics, Elsevier, vol. 37(3), pages 311-323, May.
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