Working Paper: NBER ID: w18390
Authors: Lucija Muehlenbachs; Elisheba Spiller; Christopher Timmins
Abstract: While shale gas development can result in rapid local economic development, negative externalities associated with the process may adversely affect the prices of nearby homes. We utilize a triple-difference estimator and exploit the public water service area boundary in Washington County, Pennsylvania to identify the housing capitalization of groundwater risk, differentiating it from other externalities, lease payments to homeowners, and local economic development. We find that proximity to wells increases housing values, though risks to groundwater fully offset those gains. By itself, groundwater risk reduces property values by up to 24 percent.
Keywords: Shale gas; Property values; Groundwater risk; Triple-difference estimator
JEL Codes: Q43; Q53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Proximity to shale gas wells (L71) | Housing values (R31) |
| Groundwater contamination risk (Q25) | Housing values for homes relying on groundwater (R21) |
| Proximity to shale gas wells (L71) | Net reduction in property values (R33) |
| Properties dependent on groundwater (Q25) | Negative capitalization effect (G31) |
| Properties with piped water (L95) | Benefit from nearby shale gas development (Q35) |
| Shale gas development (L71) | Diminished positive impacts for properties without access to piped water (Q25) |