Valuing the risk attached with living close to a hazardous waste site : the case of the BT Kemi scandal in Teckomatorp

Abstract: In this thesis I estimate a monetary value of the risk attached to living near a hazardous waste site in the town of Teckomatorp. This site is the result of hundreds of rusty leaking barrels of toxins being buried in the ground by the company BT Kemi in the 1970’s. Ever since then the site has been remediated in several steps and is still contaminated today. For estimating the perceived risk of living near this site I use a hedonic price model (HP) which is a form of a revealed preference approach. In a HP model the price of a market good is a function of different utility-bearing characteristics and the estimated parameters can be used to calculate the implicit prices of these characteristics. In this case I use a data set from the National Swedish Institute for Building Research (IBF) and regress property price on a number of housing characteristics. I compare an estimated town-effect for Teckomatorp with the estimates for two control towns: Billeberga and Anderslöv. I can confirm my hypothesis that, after controlling for housing characteristics, there is a negative effect on prices of property in Teckomatorp. I find that property prices are on average 46878 SEK lower in Teckomatorp than in the two control towns.