Abstract:
<p>This dissertation focuses on non-market valuation of environmental goods, using housing values and residential location decisions to infer the value of local environmental quality. It makes two contributions to the literature:</p><p>First, it explores the role of expected longevity in environmental risks valuation in a framework where individuals face multiple mortality and morbidity risks.The presence of background mortality risk from the causes unrelated to pollution reduces the willingness to pay for environmental risks reduction, because the competing risk lowers the chance that the consumer will be alive to benefit from environmental quality improvements. Using data from the Health and Retirement Study, we find that individuals with shorter expected lifespan are more likely to reside near toxins-emitting facilities. The effect of the longevity expectations is significant as compared to other determinants of environmental risk exposure identified in the previous literature, such as level of education, race, and wealth. These findings imply that the expected longevity can be an important source of heterogeneity in environmental risks valuation.</p><p>Second, we find evidence that owner-assessed home values "lag behind" market prices, and that this lag has the potential to substantially alter values ascribed to local amenities using property-value hedonic techniques. We hypothesize that long-standing homeowners lack an incentive to gather recent information on housing markets, and that their ignorance is reflected in the bias in their self-reported housing values. We first demonstrate that bias in self-reported home values is significantly correlated with tenure. We then examine how tenure length affects homeowners' valuation of changes in a particular local amenity — exposure to sites on the EPA's National Priorities List (i.e., the Superfund program). We find that recent movers report a value of a site's deletion from that list (signaling the end of the Superfund remediation process) that is 30-50% greater than that expressed by long-standing owners. This difference is significant and can have important implications for the results of cost-benefit analysis.</p>
