The Effect of Risk Beliefs on Property Values: A Case Study of a Hazardous Waste Site1


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    This paper summarizes a study entitled A Case Study of A Hazardous Waste Site: Perspectives from Economics and Psychology, which was supported by the Economic Research Program of the Office of Policy, Planning and Evaluation of the U.S. Environmental Protection Agency (USEPA) under Cooperative Agreement CR812054-02-1.


Health risk beliefs of homeowners near a landfill site were assessed in a survey and compared to expert judgments of the health risks of living near the site. A bimodal distribution of health risk beliefs suggested sharp disagreement between the experts and at least some of the residents. Correlates of high risk beliefs included perception of odor from the site, exposure to media coverage of the problem, having children living at home, age (younger respondents more concerned), and gender (females more concerned). An aggregated neighborhood health risk belief predicted reductions in home prices even after controlling for home physical characteristics, such as size and other disamenities such as proximity to a freeway. In the 4100 homes near the site, the estimated depression in property values was estimated to total about $40.2 million before the site was closed and to be about $19.7 million after closure. Implications of these results for community conflict and for benefit-cost analysis of hazard site remediation are discussed.