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

Paper Number: 2012-01

Document Date: 03/2012

Author(s): Dennis Guignet

Subject Area(s): Economic Impacts

JEL Classification: Welfare Economics: Externalities; Health: Government Policy; Regulation; Public Health; Environmental Economics: Valuation of Environmental Effects

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

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.

Published: Guignet, Dennis. 2013. "What do property values really tell us? A hedonic study of underground storage tanks," Land Economics 89(2): 211-226.

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

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