Property values and cyanobacterial algal blooms: Evidence from satellite monitoring of Inland Lakes

Abstract

We examine how the frequency of cyanobacterial harmful algal blooms (cyanoHABs) generates economic costs through the mechanism of residential property values. We assemble nearly two decades worth of nationwide data on property sales near US inland lakes along as well as satellite-derived measures of the annual frequency of cyanoHABs in over 2000 large lakes during the years 2008–2011. We combine these data sources to estimate broad scale hedonic property models to recover the marginal willingness to pay to reduce the frequency of cyanobacterial blooms in seven climate regions across the United States. We find heterogeneity in the marginal cost of cyanoHABs, with a 10-percentage point increase in annual occurrence reducing average home values for near-shore properties by 3.5% in the Upper Midwest, 3.8% in the South, 3.3% in the Southeast, and 4.3% in the Northeast. We find null or inconclusive results for other regions. We use our estimates to illustrate the household-, lake-, and regional-level impacts of counterfactual changes in the frequency of cyanoHABs.