Neighborhood Demographics and the Distribution of Hazardous Waste Risks: An Instrumental Variables Estimation

Abstract

This paper examines whether the marginal price of risk reduction varies by the demographic characteristics of neighborhoods. Using an instrumental-variables approach to control for the two-way relationship between housing prices and environmental risk, the paper finds that the marginal valuation of risk reduction is higher in high-education and high-income neighborhoods. The results also suggest that environmental risks are greater in neighborhoods with low-priced houses and in neighborhoods with low levels of collective action, suggesting that polluters consider these characteristics when making their siting decisions.