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Working Paper: The Impacts of Underground Petroleum Releases on a Homeowner's Decision to Sell: A Difference-in-Differences Approach

Paper Number: 2016-03

Document Date: 06/2016

Author(s): Dennis B. Guignet; Adan L. Martinez-Cruz

Subject Area(s): Environmental Management: General, Water Pollution, Economic Damages/Benefits, Economic Impacts

JEL Classification:

D62 - Externalities
I18 - Government Policy; Regulation; Public Health
Q51 - Valuation of Environmental Effects
Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
R20 - General

Keywords: housing market, property transaction, discrete time duration model, underground storage tank, groundwater contamination

Abstract: Actual and perceived damages from environmental disamenities may disrupt a household's otherwise optimal decision of when to sell their home. This study examines this relatively under-investigated topic with an empirical application to petroleum releases from leaking underground storage tanks, like those commonly found at gas stations. The ubiquity and relative homogeneity of this potential disamenity facilitates a difference-in-differences methodology. The results reveal that the optimal timing of home sales is impacted by leak and cleanup events at these disamenities; leading to both selling sooner and delaying a sale, depending on the event, presence of the primary exposure pathway, and the quality of the home. The implications of these results are discussed.

This paper is part of the Environmental Economics Working Paper Series.

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