Working Paper: NBER ID: w15017
Authors: Hilary Sigman
Abstract: Many communities are concerned about the reuse of potentially contaminated land ("brownfields") and believe that environmental liability is a hindrance to redevelopment. However, with land price adjustments, liability might not impede the reuse of this land. Existing literature has found price reductions in response to liability, but few studies have looked for an effect on vacancies. This paper studies variations in state liability rules -- specifically, strict liability and joint and several liability -- that affect the level and distribution of expected private cleanup costs. It explores the effects of this variation on industrial land prices and vacancy rates and on reported brownfields in a panel of cities across the United States. In the estimated equations, joint and several liability reduces land prices and increases vacancy rates in central cities. Neither a price nor quantity effect is estimated from strict liability. The results suggest that liability is at least partly capitalized, but does still deter redevelopment.
Keywords: Environmental Liability; Brownfields; Redevelopment; Industrial Land Prices; Vacancy Rates
JEL Codes: K13; K32; Q53; R14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| joint and several liability (K13) | industrial land prices (R33) |
| joint and several liability (K13) | vacancy rates (R33) |
| strict liability (K13) | industrial land prices (R33) |
| strict liability (K13) | vacancy rates (R33) |