The External Costs of Industrial Chemical Accidents: A Nationwide Property Value Study
Paper Number: 2023-01
Document Date: 02/2023
Author(s): Dennis Guignet, Robin R. Jenkins, Christoph Nolte, and James Belke
Subject Area(s): toxic substances, economic damages/benefits, industrial source, benefit-cost analysis, valuation
JEL Classification: D61, L50, Q51, Q53
Keywords: chemical accident, hedonic, nonmarket valuation, property value, Risk Management Plan, welfare effects
Abstract: Industrial chemical accidents involving fires, explosions, or toxic vapors impose external costs on nearby communities. We examine changes in residential property values using nationwide data on chemical facilities, accidents, and residential transactions within a spatial difference-in-differences framework. We find that accidents with direct offsite impacts lower home values within 5.75 km by 2-3%, an effect that remains for at least 15 years. We estimate an average loss of $5,350 per home, which translates to a $39.5 billion loss to communities around the 661 facilities where an offsite impact accident occurred. We assess the assumptions needed for a formal welfare interpretation and conclude these results roughly approximate losses experienced by nearby residents.
This paper is part of the Environmental Economics Working Paper Series.
The External Costs of Industrial Chemical Accidents: A Nationwide Property Value Study (pdf)