Essays in Environmental Economics

Abstract

This dissertation is an empirical study of how people value avoiding different types of pollution. Chapter 2 investigates how much people value not living near some of the most contaminated lands in the United States, known as Superfunds. In particular, it analyzes how information heterogeneity affects people's valuation of avoiding Superfund sites. Chapter 3 explores how much people dislike water pollution using a synthetic control method, an advanced econometric technique. Chapter 4 uses aggregate data to measure the impacts of improved air quality on house prices in California.Since the Industrial Revolution, there have been growing concerns over pollution and human health. In 1970, then-President Richard Nixon signed an executive order creating the Environmental Protection Agency (EPA) to safeguard the public from environmental harm. A key task for policymakers is conducting cost-benefit analysis of environmental regulations and cleanup programs. As such, it is imperative to have accurate estimates of people's valuations for changes in environmental hazards; even small bias in such estimates can lead to significantly different outcomes in cost-benefit analyses. Calculating people's valuations of avoiding pollution is made even more difficult by the different levels of awareness about pollution. Chapter 2 studies how much people dislike living next to the EPA's Superfund sites, which are some of the most environmentally hazardous areas in the United States, by using changes in house prices in a hedonic model. In particular, it investigates how different levels of information provision through local news outlets affects people's valuations. The results suggest that there are substantial differences in households' valuations of avoiding a Superfund site when accounting for the different levels of awareness. In fact, house prices around sites that do not receive news coverage remain constant, while prices around sites that receive coverage fall significantly. The results show that while people dislike living in polluted areas, information provision and people's awareness of the pollution can cause significant biases in the valuation estimates.Chapter 3 investigates the impact of Per- and polyfluoroalkyl substances (PFAS), a pollutant that has received significant attention recently, on house prices. The drinking water system in the city of Wilmington, North Carolina, was found to have been contaminated with PFAS in 2016. In order to create a valid counterfactual for Wilmington, the synthetic control method is used. While PFAS was discovered in Wilmington, many cities in North Carolina did not have PFAS in their drinking water systems, and these cities are weighted to construct a synthetic version of Wilmington. The difference in house prices between Wilmington and the synthetic Wilmington shows people's valuations in avoiding PFAS. Results show that house prices in Wilmington fell by more than 5 percent due to PFAS, suggesting that people are willing to pay 5 percent in their house prices to avoid the harmful chemical. The final empirical study leverages one of the most comprehensive environmental regulations in the history of the United States: the Clean Air Act. This law mandated that counties in the US reduce particular matter to acceptable levels or face penalties. The regulation helped decrease air pollution and Chapter 4 is dedicated to analyzing how house prices reacted to the improved air quality, and thus, how much people value improvements in particular matter levels.