THREE ESSAYS ON THE EMPIRICAL ESTIMATION OF ENVIRONMENTAL DAMAGES THROUGH MARKET AND HEALTH IMPACTS

Establishing effective environmental policies is of considerable importance around the world and becoming more crucial as human activities continue to change and impact natural resources. The design of effective policies requires knowledge of the mechanisms through which markets and individual behavior respond to environmental risks. The following research focuses on the empirical estimation of such responses in the presence of environmental risk to inform policy decisions. I apply econometric methods to a variety of environmental issues, including flooding, environmental disasters, and air pollution. My findings provide important information regarding the setting of future policies related to each issue. In the first chapter, “Estimating the Economic Impact of Stormwater runoff in the Allen Creek Watershed,” written with Jeffrey Wagner, Karl Korfmacher, Daniel Lass and Bríd Gleeson Hanna, we develop an economic model for stormwater runoff control to quantify one important part of the tradeoff between the desirability of development versus the consequential environmental challenges and economic costs associated with increased flooding risk. Developing a theoretical model and illustrating its application in the Allen Creek watershed, we account for heterogeneity in each parcel-level generation of stormwater runoff to estimate the marginal implicit price of additional stormwater runoff due to development on downstream property values. We translate this value to a marginal damage figure specific to our study area and compare our results with a relevant abatement cost estimate. Our comparison suggests a general result that policies encouraging upstream abatement measures, such as retention ponds, are likely to be economically efficient. The second chapter, “Information and Environmental Disasters: Valuing Public Perception Regarding the Deepwater Horizon Oil Spill,” written with Patrick Walsh, quantifies the value of risk-signaling information in the context of shoreline oil wash-ups from the Deepwater Horizon (DWH) oil spill. We analyze sale price and volume responses in Hillsborough County, Florida, which ultimately experienced no wash-ups. This chapter provides insight on the types of information that are salient for the capitalization of perceived risk into home values and highlights an additional avenue for economic losses from environmental catastrophes that has often been overlooked. Our results suggest that the net impact of the heightened risk of oil wash-ups on coastal homes was a ~4% reduction in sale prices between two and eight months after the DWH oil spill, with the largest impact of a ~7% reduction in prices occurring in August and September 2010. The timing of these price impacts suggests that specifically relevant information regarding risk, coming from a source of authority is critical in driving risk perceptions and ultimate price effects in the real estate market. Finally, our results suggest a total capitalized loss of $4.5 million which highlights the importance of considering a more comprehensive definition of damages, specifically accounting for losses associated with public perception of risks, when compensating states and local governments, as well as citizens, for losses due to environmental disasters. In the final chapter, “Quantifying the Health Effects of Information on Pollution Levels in Chile,” written with Jamie Mullins, we analyze a policy implemented by the Government of Chile that institutes temporary measures to reduce negative impacts of high levels of air pollution in the short run through both emissions restrictions and public information campaigns. This policy includes public announcement of days for which pollution is projected to exceed threshold levels, deemed ‘Episodes’. As Episodes serve to both reduce air pollution and inform the public, this chapter separately identifies the mortality reducing effects of Episode announcements acting through the channel of information and avoidance behavior from the total effect of Episode announcements, which includes effects attributable to improved air quality. We find that, holding PM10 constant, the estimated impacts of the Episodes’ informational effects have magnitudes comparable to the estimated total effects of Episode announcements on the day of and two days after an Episode announcement, indicating that information is playing a critical role in the reduction of mortality following Episode announcements. Our results suggest that little of the observed reduction in mortality following Episodes is attributable to lower ambient air pollution in the most immediate days following an announcement, despite the fact that air pollution does improve significantly following Episode announcements. These results are important for informing the implementation of short term approaches for addressing spikes in air pollution in other major urban centers