August 1, 2011

Something in the Water?

Testing for Groundwater Quality Information in the Housing Market
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I test the level of information regarding possible groundwater contamination in the residential real estate market in Washington County, Minnesota. An approximately seven square-mile trichloroethylene plume has affected hundreds of households’ water supplies since at least 1988 in the region.  I find that homeowners were initially well-informed by market forces, but were later somewhat misinformed by government actions regarding the potential of water contamination from the plume. A disclosure law passed in 2003 may have added new, low-cost, and imperfect information to the market that could explain the change in informational awareness.