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Abstract
This study estimates the property value gains associated with improvements in water clarity on twenty Northern Wisconsin lakes. The analysis uses a two-stage hedonic model applied to Wisconsin Department of Natural Resources water studies data and sales data for over 300 homes. The results estimate that a 3-foot improvement in water clarity would produce a 9%-16% improvement in the value of an average property on lakes with the lowest clarity.
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Introduction
A number of lakes in Northern Wisconsin exhibit low levels of water clarity. It is wellestablished that perceptions of water quality have a significant bearing on property values.1 As such, this study investigates the possible economic effects of improvement in water clarity of lakes that currently exhibit low clarity. The study shows that improved water clarity could result in a significant improvement in property values as well as economic benefits to surrounding areas, such as increased tourism. Rising property values means increased property taxes and potentially increased government revenue. Improving water clarity is not without costs however. Therefore, communities need to investigate whether the economic benefits exceed the costs associated with water clarity improvement and if there is a clear case to be made for said improvements.2
This study seeks to better understand the value increase increments likely to be associated with improvements in water clarity. From this, it will be possible to estimate the likely economic benefits to both the private and public sector. The goal is to produce better informed and economically sound environmental remediation, and an improvement in the already impressive natural resources.
Outline of the Study
The discussion of the case study research will proceed as follows. First, an overview and brief history of the twenty lakes chosen for the study area is given. Then, the method of analysis used for the study and a brief primer on hedonic modeling are presented. An overview of the relevant literature and a discussion of the sources of the data used are also included. Next, the specific model used to conduct the analysis is described in detail. A two-stage hedonic model is used, which is similar to the models in other studies of this type. Some of the problems encountered during the construction of the model...