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Property values and water quality: A nationwide meta-analysis and the implications for benefit transfer

Paper Number: 2019-05

Document Date: 06/2019

Author(s):  Dennis Guignet, Matthew T. Heberling, Michael Papenfus, Olivia Griot and Ben Holland

Subject Area(s): Water Pollution, Valuation Methods, Valuation

JEL Classification: Q51, Q53

Keywords: benefit transfer, hedonic, meta-analysis, property value, water pollution, water quality

Abstract: We conduct a meta-analysis using a comprehensive review of studies that examine the effects of water quality improvements on waterfront and non-waterfront housing values. Rather than conducting the meta-analysis using dollar values, this study estimates mean elasticity responses. We identify 36 studies that result in 656 unique observations. Mean property price elasticities with respect to numerous water quality measures are calculated (e.g., chlorophyll-a, fecal coliform, nitrogen, and phosphorous) for purposes of value transfer. In the context of water clarity, function transfers can be performed. We estimate numerous meta-regressions, and compare transfer performance across models using an out-of-sample transfer error exercise. The results suggest value transfers often perform just as well as more complicated function transfers.  In our context, however, a simple function transfer that accounts for baseline water clarity performs best.  We discuss the implications of these results for benefit transfer, and outline key limitations in the literature. 

This paper is part of the Environmental Economics Working Paper Series.

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