Exceeding the Threshold: Analysis of Public Information Transfer using Instrumental Variables
Abstract
This paper examines how information transfer about contamination levels found at brownfield
sites capitalizes into nearby property values. More specifically, a hedonic model
is used to test the impact on housing transaction prices when a binary measure (i.e.
exceeding a threshold or not) or a continuous measure (i.e. chemical levels) is used.
In the analysis, I exploit the variation in the contaminant thresholds, caused by
regulatory conditions defined by the state of Massachusetts, holding the contaminant
level constant. As thresholds are tied to neighborhood attributes in areas surrounding
brownfields, threshold exceedance is potentially correlated to unobserved factors
that impact housing values. An instrumental variables approach is used to create variation
in threshold exceedance through the use of an instrument that measures the presence
to underground aquifers. After instrumenting for threshold exceedance, my estimates
indicate that a 10.8% decrease in housing values occurs when a contaminant threshold
is exceeded, while the continuous measures of toxicity indicate a negative but insignificant
effect. These findings suggest that policy makers should consider information conveyance
when creating policies to inform homeowners of pollution presence, as improved information
provision may increase public awareness about local environmental concerns.
Type
Honors thesisDepartment
EconomicsPermalink
https://hdl.handle.net/10161/8421Citation
Inder, Gabrielle (2014). Exceeding the Threshold: Analysis of Public Information Transfer using Instrumental
Variables. Honors thesis, Duke University. Retrieved from https://hdl.handle.net/10161/8421.Collections
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