Department of Agricultural and Resource Economics

Stigma is a negative attribute of real estate acquired by the discovery of contamination and reflected in its value (Elliot-Jones, 1996). Using a theoretical model with external economies and adjustment costs, we show that both temporary stigma and permanent stigma are possible equilibrium outcomes after the discovery and cleanup of a hazardous waste site. The existence and duration of stigma are examined using hedonic price techniques with data from housing sales prices in Dallas County, Texas. The empirical evidence shows that stigma exists after cleanup only for properties in very close proximity to the hazardous waste site.