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    Exceeding the Threshold: Analysis of Public Information Transfer using Instrumental Variables

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    Date
    2014-04-16
    Author
    Inder, Gabrielle
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    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 thesis
    Department
    Economics
    Subject
    brownfields
    pollution
    housing markets
    hedonic analysis
    instrumental variables
    Permalink
    http://hdl.handle.net/10161/8421
    Citation
    Inder, Gabrielle (2014). Exceeding the Threshold: Analysis of Public Information Transfer using Instrumental Variables. Honors thesis, Duke University. Retrieved from http://hdl.handle.net/10161/8421.
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    This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.

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