Lake rehabilitation and the value of shoreline real estate: Evidence from Delavan, Wisconsin

Abstract

In this article we use the hedonic price model to estimate the effect of a change in water quality on the value of real estate in the lake community of Delavan, Wisconsin. Hedonic techniques show that a $7 million rehabilitation program significantly increased Delavan Lake shoreline property values. Existing research demonstrates that the use of objective water quality measures (as opposed to subjective measures) is important for estimating the implicit value of water quality in hedonic analyses. This article provides new evidence on the economic benefits of clean water by measuring the change in property values attributed to an observable rehabilitation event.