Hedonic analysis of hazardous waste sites in the presence of other urban disamenities

Abstract

Hedonic research indicates that residential property values are reduced by increased proximity to hazardous waste sites, a measure of diminished environmental quality. Standard hedonic procedures measure proximity by the linear distance between a property and a waste site of interest. A sample of properties is then used to estimate a distance-to-site coefficient that measures the effect of the hazardous waste site on surrounding property values. These estimates can help policy makers assess the external effects of hazardous waste sites and may also be useful in both prioritizing and assessing the benefits of cleanup. In an urban situation, hazardous waste sites are often located near other industrial disamenities such as railroads, storage tanks, industrial noises, and air pollution. This spatial grouping of hazards may be due to economic forces or due to policy instruments such as zoning. As a result, distance to hazardous waste site may be correlated with distances to other industrial disamenities. Standard hedonic procedures that use a distance-to-site variable may suffer from omitted variable bias when the bundled industrial disamenities are present but ignored. Our empirical analysis examines this bias by assessing hedonic regressions with and without a measure that accounts for industrial activity.