Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)
University of California, Berkeley - Department of Economics
January 30, 2008
MIT Department of Economics Working Paper No. 05-27
FEEM Working Paper No. 149.05
This paper uses the housing market to develop estimates of the local welfare impacts of Superfund sponsored clean-ups of hazardous waste sites. We show that if consumers value the clean-ups, then the hedonic model predicts that they will lead to increases in local housing prices and new home construction, as well as the migration of individuals that place a high value on environmental quality to the areas near the improved sites. We compare housing market outcomes in the areas surrounding the first 400 hazardous waste sites chosen for Superfund clean-ups to the areas surrounding the 290 sites that narrowly missed qualifying for these clean-ups. We find that Superfund clean-ups are associated with economically small and statistically indistinguishable from zero local changes in residential property values, property rental rates, housing supply, total population, and the types of individuals living near the sites. These findings are robust to a series of specification checks, including the application of a regression discontinuity design based on knowledge of the selection rule. Overall, the preferred estimates suggest that the local benefits of Superfund clean-ups are small and appear to be substantially lower than the $43 million mean cost of Superfund clean-ups.
Number of Pages in PDF File: 59
Keywords: Valuation of environmental goods, Hazardous waste sites, Environmental regulation, Regression discontinuity, Superfound, Externalities
JEL Classification: H4, Q51, Q53, R5, R2, I18working papers series
Date posted: November 7, 2005 ; Last revised: February 22, 2008
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