Poster Paper: Environmental Hazards in a Lax Regulatory Environment: Measuring Willingness to Pay to Avoid Radon Exposure

Saturday, November 9, 2019
Plaza Building: Concourse Level, Plaza Exhibits (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Lala Ma and Samuel J. Owens, University of Kentucky

Known as the silent killer due to its colorless and odorless nature, radon is potentially under-estimated as an environmental threat. Individual response to radon exposure has been relatively unstudied in the United States in recent years, which makes informed policy decisions difficult. Radon exposure is the second leading cause of lung cancer deaths in the United States, trailing only smoking. The dangers posed by residential radon have been known for decades; however, the EPA estimates that 1 in 15 homes in the United States still contain potentially dangerous levels of radon. This project uses a property value hedonic approach to estimate consumer willingness to pay (MWTP) for a marginal reduction in radon exposure. If consumers are averse to radon exposure, the sale price of a home with elevated levels of radon will be lower than that of an identical home with lower levels of radon. On the other hand, if households are unaware or unconcerned with radon risk, then one would be unlikely to detect any housing price differential among properties with varying radon levels. In this study, we estimate MWTP by using the universe of housing transactions in Fayette County, KY from 2002 to 2017 and exploiting variation in potential radon exposure induced by underlying geology. Kentucky provides a particularly suitable area of study due to the wealth of radon and housing data, the variability of radon levels, and the relative lack of state-level policies designed to address the issue. This paper uses a novel dataset of radon exposure based on underlying geology and radon test kit results constructed by the Kentucky Geological Survey. This dataset allows us conduct a boundary discontinuity design that isolates the causal effect of radon exposure on home price. Results suggest that homes in high radon areas sell for between 2 and 2.5% less than they would in a low radon area, which amounts to between $3,800 and $4,700 based on the mean selling price of Fayette County homes. Based on this effect, individuals may currently be informed to a degree where additional disclosure requirements and policy prescriptions may be unnecessary. A more accurate understanding of consumer response and awareness of radon will help policymakers make informed decisions on disclosure requirements and public awareness campaigns.