| 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. |