Conference Agenda

On September 18, 2014, the Federal Aviation Administration implemented new arrival and departure paths to Phoenix Sky Harbor International Airport. Overnight, aircraft noise increased in some residential neighborhoods and decreased in others. These changes occurred with no advance warning. We leverage this shock to provide causal evidence on the value of noise pollution. Our hedonic design uses data on houses that were sold both before and after the shock to identify households' willingness to pay---through housing prices---to reduce noise pollution. We find robust evidence that a one decibel increase in noise caused property values to decline by 1.2%

The expansion, opening or closure of an international airport is an ‘ideal’, but very rare, external shock for monetising aviation noise. There are a hand-full of quasi-experimental studies on the context and only one that estimates a marginal (per decibel) value of noise increase from runway expansion. We employ a quasi-natural experiment of a major international airport closure in Greece as the noise removal treatment. We propose an extension of the difference-in-differences hedonic pricing to include a ‘differenced Comparable Sales’ approach inspired by a type of first-difference transformation widely employed in real estate industry. This approach treats omitted variable bias without requiring any small-area fixed-effects, which is especially useful in cases of sparse and challenging data. We contribute to the literature by estimating for the first time a marginal willingness to pay of 0.74% price increase per decibel of noise reduction from an airport closure quasi-natural experiment. The airport closure results on average to a 5.4% price increase, which provides a tentative estimate of over 1 billion €s potential benefits because of the aviation noise termination capitalised in the local housing stock. We also find that noise reductions are not valued linearly above 65 decibels.

The direct effects of natural capital depletion are well studied in the literature. However, decreasing stocks of natural resources and environmental goods may also impact economic activity not directly engaged in resource extraction. These indirect effects remain relatively unexplored within the natural resource and environmental economics literature. This paper addresses this gap by empirically examining how contemporaneous and long-run decreases in groundwater stocks affect agricultural loan delinquency rates—a key metric assessing the health of financial institutions serving agricultural producers. Results indicate that decreasing stocks of groundwater increase agricultural loan delinquency rates, particularly production loans, with only limited evidence of adaptation. This demonstrate an important indirect channel through which diminishing groundwater stocks impact the health and profitability of financial institutions.

Environmental regulations targeting air pollution and chemical exposure typically generate joint reductions in multiple health risks. In environmental Cost-Benefit Analysis, these benefits are commonly valued by eliciting Willingness to Pay (WTP) for individual health risk reductions through distinct valuation surveys and aggregating the resulting estimates. This article examines whether the biases generated by such aggregation procedures remain limited in magnitude, and therefore acceptable for practical welfare assessment, when several health risks are involved. An analytical framework is first developed to explicitly characterize the different welfare biases associated with the aggregation of separate WTP measures. The analysis thus revisits the Individual Valuation and Summation (IVS) approach by formally deriving the associated bias and extending its characterization beyond the standard two-risk case. In addition, it identifies a second source of bias, referred to here as a Separate Valuation and Summation (SVS) bias, which arises when each health risk is valuated in isolation while other environmentally related risks are implicitly neglected. To assess the empirical relevance of these effects, a Pseudo-Separate Valuation framework is implemented within a single Discrete Choice Experiment. This approach is applied to 3 morbidity risks (Asthma, Chronic Kidney Disease, and Type 2 Diabetes) associated with air pollution and chemical exposure, across 6 European countries. The results indicate that IVS bias remains limited for marginal risk changes, whereas SVS bias can be substantial. They further show that total bias increases with initial risk levels and varies across countries. Overall, these findings highlight the importance of accounting for cross-risk interactions in the valuation of environmental health benefits.