The impact of airport noise on willingness to pay for residences

Abstract

The effects of aircraft noise following airport expansion on the willingness to pay (WTP) for residences is examined, using a contingent valuation approach. WTP estimates are elicited for a standard residence whose noise settings are systematically changed. The results show that most current compensation programs are inadequate, as they do not fully compensate home owners or renters for the loss associated with higher noise exposure. This analysis also shows that such valuations should analyze noise as a multi-attribute externality, rather than by a single composite measure. Finally, the results indicate that household WTP structures are kinked, whereby, beyond a certain disturbance threshold, households are unwilling to pay anything for the residence; yet, different households have different thresholds. This kinked WTP structure helps explain the higher noise premiums obtained in CVM studies relative to hedonic price estimates.