Monetarizing Spillover Effects of Soil and Groundwater Contaminated Sites in Taiwan: How Much More Will People Pay for Housing to Avoid Contamination?

Date01 March 2019
Published date01 March 2019
AuthorAlan Randall,Pei‐Ing Wu,Je‐Liang Liou,Han‐Huei Chen
DOIhttp://doi.org/10.1111/asej.12169
Monetarizing Spillover Effects of Soil and
Groundwater Contaminated Sites in Taiwan:
How Much More Will People Pay for Housing to
Avoid Contamination?*
Je-Liang Liou, Alan Randall, Pei-Ing Wu and Han-Huei Chen
Received 24 March 2017; Accepted 5 February 2019
This study monetizes spillover effects of soil and groundwater contaminated sites
using a quantile hedonic price model for different site types in Taoyuan City in
Taiwan, which has 1664 sites, the highest number for any city in Taiwan. The
results show that except for those living in the cheapest housing, most residents
are willing to pay a higher price to live farther away from contaminated sites.
Farmland makes up the largest share of the total contaminated site area and has
the highest per square monetary spillover effects in Taoyuan City; remediation of
farmland is one of the most urgent missions for the city. Overall, a NIMBY effect
is found to exist for soil- and groundwater-contamination in this city.
Keywords: geographic information system, housing property, NIMBY effect,
quantile hedonic price model, willingness to pay.
JEL classication codes: C21, Q24, Q51, Q53.
doi: 10.1111/asej.12169
I. Introduction
Groundwater and soil contamination impacts not only the environmental quality
of sites themselves, but also the living quality and property values of nearby
housing. These impacts are spillover effects of the site contamination. Among
these spillover effects, the impact on housing prices is one of the most distinct
features (United States Environmental Protection Agency, 2015).
The Soil and Groundwater Pollution Remediation Act of Taiwan states that if a
specic site is contaminated, the polluter is responsible for remediation of the site.
However, it is usually either impossible or difcult to identify the actual polluters.
*Liou: The Center for Green Economy, Chung-Hua Institution for Economic Research, No. 75,
Changhsing Street, Daan District, Taipei, 106, Taiwan. Randall: Department of Agricultural, Envi-
ronment, and Development Economics, the Ohio State University, 250 Agricultural Administration
Building, 2120 Fyffe Road, Columbus, OH 43210, USA. Wu (corresponding author): Department of
Agricultural Economics, National Taiwan University, No.1 Section 4, Roosevelt Road, Taipei 106,
Taiwan. Email: piwu@ntu.edu.tw. Chen: The Center for Green Economy, Chung-Hua Institution for
Economic Research, No. 75, Changhsing Street, Daan District, Taipei, 106, Taiwan. We sincerely
appreciate the nancial support for this study through project NSC102-2410-H-170-006 of the
National Science Council, Taiwan.
© 2019 East Asian Economic Association and John Wiley & Sons Australia, Ltd
Asian Economic Journal 2019, Vol.33 No. 1, 6786 67
As a result, the cost of remediation for the contamination site will normally not be
borne by the polluter. The costs, thus, are, in fact, borne by others in different
ways. The impact on housing prices is one such cost. It is expected that housing
prices will be lower if housing is close to or surrounded by any type of contami-
nated site (Rinaldi, 1991; Page and Rabinowitz, 1993; Simons et al., 1999). That
is, housing price differences between houses that are close and those that are not
close to contaminated sites can be deemed a spillover effect of contaminated sites.
Moreover, the impact on housing prices near a contamination site could also be
reinforced by the stigma effect for housing property (Dale et al., 1999; Messer
et al., 2006). Similar to the not in my back yard(NIMBY) effect, the stigma
effect is due to peoples aversion to contaminated sites.
Exploration of the spillover effects of soil and groundwater contamination, hazard-
ous industrial facilities or landll in the existing literature has mostly been conducted
in developed countries (e.g. Hite et al., 2001; Kiel and Zabel, 2001; Greenstone
et al., 2008; Gamper-Rabindran and Timmins, 2012; Grislain-Letriémy and
Katossky, 2014; Taylor et al., 2016). To the best of our knowledge, no study mone-
tizes such spillover effects, nor is there research accounting for a mediating effect of
housing property attributes on the price differentiation, despite the importance of this
issue. One of the reasons is that collecting and compiling related data in the early
stage of site management is not as high a priority as other remediation efforts. In Tai-
wans existing literature, Li et al. (2015) is the only study which has investigated the
difference in the surrounding real estate prices depending on whether or not soil and
groundwater contamination were remedied. However, that study only considered the
case of an individual factory and did not cover the impact for farmland or gas station
sites. It is hard to obtain a comprehensive picture and valuable information from just
one case study. As a result, no specicbasiscanbeusedtosystematically analyze
the related site management. Fortunately, a database on g roundwater and soil con-
taminated sites in Taiwan has been compiled over time. This makes monetary evalu-
ation of the spillover effects of contaminated sites possible at present.
In Taiwan, there are currently 2507 soil and groundwater contaminated sites in
the country that exceed pollution control standards; these sites are spread across
almost every city and county. Taoyu an City, one o f the special districts, with 1664
sites, has the most sites among all cities and counties in Taiwan. This city has a pop-
ulation of 2.6 million, and is home to one-third of the top 500 companies with the
highest industrial value among all cities and counties in Taiwan. In addition, 30 per-
cent of the total area of the city is agricultural land and, mainly for rice production.
Thus, remediation of these contaminated sites is, indeed, an imperative task for the
city. It is also an urgent mission for the related agencies involved in the implementa-
tion of the Soil and Groundwater Pollution Remediation Act in Taiwan. Thus, exam-
ination of the spillover effects of these contaminated sites is not only essential for
Taoyuan City but will also serve as an important model for the attainment of similar
management targets for other cities and counties in Taiwan in the future.
The hedonic price method (HPM) is one of the approaches used in the exis-
ting literature for estimating the impacts of property attributes on housing prices.
ASIAN ECONOMIC JOURNAL 68

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