Can environmental disamenities increase land values? A case study of manufacturing factories on farmland

Abstract

Abstract The theory of ‘not in my backyard (NIMBY)’ in the environmental economics literature shows that disamenities can reduce land or property values. In contrast to prior research, this study provides an interesting case study to show that environmental disamenities can increase farmland values. Using population-based farmland sales data drawn from administrative profiles in Taiwan, we estimate the impacts of manufacturing factories on farmland sales prices. The regression discontinuity design is applied to identify these causal effects. We find that the presence of manufacturing factories increase farmland sales prices by 21.4 percent, ceteris paribus. The positive effects are more pronounced for farmland with manufacturing factories that produce soil and heavy metal waste. We argue that these contradictory findings to the NIMBY literature are attributable to loose law enforcement measures due to the low detection rate and penalties on illegal uses of farmland. Strict law enforcement and policy reforms are needed to remove these distortions of farmland use.