Underground Pipeline Explosions and Housing Prices: Quasi-experimental Evidence from an Urban City

Abstract

Prior research suggests that underground pipelines do not affect housing prices or that their adverse effects decrease over time. This paper examines an interesting case study where underground pipeline explosions cause negative effects that may persist over longer periods of time. Using an administrative population-based sample of housing transaction records in Taiwan, we estimate the effect of an underground pipeline explosion on housing prices in the island’s second-largest urban city. Overall, the underground pipeline explosion reduced housing prices by 2.9% in the following nine months after the explosion. The explosion directly decreased housing prices by 3.4% during the cleanup period (the first three months after the explosion). However, housing prices directly decreased by 4.9% during the recovery period (the fourth to ninth months after the explosion). We identify migration across districts as a potential mechanism responsible for the explosion’s effect on equilibrium housing prices.