Local Impacts of Wind Farms on Property Values: A Spatial Difference-in-Differences Analysis

FCN Working Paper No. 1/2014

38 Pages Posted: 24 Sep 2014 Last revised: 12 Oct 2014

See all articles by Yasin Sunak

Yasin Sunak

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN)

Reinhard Madlener

RWTH Aachen University

Date Written: October 1, 2014

Abstract

Today’s investment decisions in large-scale onshore wind projects in Germany are no longer determined only by the investment’s economic benefit, but also by concerns associated to social acceptance. Despite a mostly positive attitude towards the expansion of wind power, local public concerns often stem from the belief that the proximity to large-scale wind farms may lead to a decrease in property prices. In particular, the change in landscape caused by the construction of a wind farm may have an adverse impact on the view from some properties, and thus may negatively affect their price. To investigate the potential devaluation of properties in Germany due to wind farms, we use a quasi-experimental technique and apply a spatial difference-in-differences approach to various wind farm sites in the federal state of North Rhine-Westphalia. We adopt a quantitative visual impact assessment approach to account for the adverse environmental effects caused by the wind turbines. To properly account for spatial dependence and unobserved variables biases, we apply augmented spatial econometric models. The estimates indicate that the asking price for properties whose view was strongly affected by the construction of wind turbines decreased by about 10-17%. In contrast, properties with a minor or marginal view on the wind turbines experienced no devaluation.

Keywords: Wind power, Difference-in-differences, Visual impact, Spatial dependence

JEL Classification: Q42, Q51, R31

Suggested Citation

Sunak, Yasin and Madlener, Reinhard, Local Impacts of Wind Farms on Property Values: A Spatial Difference-in-Differences Analysis (October 1, 2014). FCN Working Paper No. 1/2014. Available at SSRN: https://ssrn.com/abstract=2500217 or http://dx.doi.org/10.2139/ssrn.2500217

Yasin Sunak (Contact Author)

RWTH Aachen University - Institute for Future Energy Consumer Needs and Behavior (FCN) ( email )

Mathieustrasse 10
Aachen, 52074
Germany

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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