A Loon on Every Lake: A Hedonic Analysis of Lake Quality in the Adirondacks

Abstract

The Adirondack Park contains over 6 million acres and over 3,000 lakes. Approximately 43% of the Park is publicly owned and protected to remain “forever wild”. Despite regulatory measures aimed at protecting the natural resources of the Adirondacks, surface water quality is threatened by acid and mercury deposition. This paper uses data on 12,001 property transactions over 9 years in the 12 counties that comprise the Adirondack Park to explore how property owners value lake water quality using fixed effects hedonic analysis. We find that multiple measures of water quality have significant effects on property values including lake acidity, the presence of water milfoil, an invasive species, and the presence of loons, an indicator species. This research provides valuable insight into how water quality and associated ecosystem health are capitalized into property values. Moreover, this research helps partially quantify air pollution impacts on Adirondack property values and could be used to justify additional regulations to further restrict sulfur and mercury emissions which are negatively impacting the Park.

Keywords: Hedonic Analysis, Ecosystem Services, Water Quality

JEL Classification: Q5