Working Paper: NBER ID: w11667
Authors: Howard F. Chang; Hilary Sigman
Abstract: In response to claims that the threat of environmental liability under the Superfund law deters the acquisition of potentially contaminated sites (or "brownfields") for redevelopment, the federal government has adopted programs to protect purchasers from liability. This protection may be unwarranted, however, if sellers can simply adjust property prices downward to compensate buyers for this liability. We present a model of joint and several liability under Superfund that allows us to distinguish four different reasons that this liability may discourage the purchase of brownfields. The previous literature has overlooked the effects that we identify, which all arise because a sale may increase the number of defendants in a suit to recover cleanup costs. Our analysis suggests that the brownfields problem may be more widespread than one might infer from the prior literature. Furthermore, the effects that we identify may distort not only the incentives to sell property subject to Superfund liability but also any decision of any party subject to any joint and several liability if that decision could affect the number of other defendants liable for the same harm.
Keywords: Superfund; Brownfields; Liability; Environmental Policy
JEL Codes: Q5; K32; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sale of contaminated property (H82) | collective expected liability of the buyer and seller (G33) |
| collective expected liability of the buyer and seller (G33) | efficient transactions (D61) |
| sale of contaminated property (H82) | expected damages recoverable by the government (H84) |
| expected damages recoverable by the government (H84) | transactions (L14) |
| litigation costs associated with a sale (K41) | property sales (R33) |
| increase in the number of defendants (K41) | government's ability to extract settlements (H13) |
| government's ability to extract settlements (H13) | transactions (L14) |