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What Do Property Values Really Tell Us? A Hedonic Study of Underground Storage Tanks

Author

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  • Dennis Guignet

Abstract

Hedonic property value models are widely used, but are susceptible to omitted variable bias and potentially invalid conjectures regarding the assumed measure of environmental quality. This paper focuses on an application where both are of particular concern: leaking underground storage tanks. I estimate a hedonic model using quasi-experimental and spatial econometric techniques. Similar to previous studies, I examine how house prices vary with distance to the disamenity. This approach yields little evidence that prices are adversely impacted. However, to better measure risks, I utilize home-specific data on correspondence from environmental regulators, and find a 9-12% depreciation when households are well-informed.

Suggested Citation

  • Dennis Guignet, 2012. "What Do Property Values Really Tell Us? A Hedonic Study of Underground Storage Tanks," NCEE Working Paper Series 201201, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Mar 2012.
  • Handle: RePEc:nev:wpaper:wp201201
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    File URL: https://www.epa.gov/environmental-economics/working-paper-what-do-property-values-really-tell-us-hedonic-study
    File Function: First version, 2012
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    More about this item

    Keywords

    hedonic analysis; housing prices; leaking underground storage tanks; LUST; contaminated sites; groundwater contamination; remediation benefits;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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