Valuation of expectations: A hedonic study of shale gas development and New York’s moratorium

This paper examines the local impacts of shale gas development (SGD). We use a hedonic framework and exploit a discrete change in expectations about SGD caused by the New York State moratorium on hydraulic fracturing. Our research design combines difference-in-differences and border discontinuity, as well as underlying shale geology, on properties in Pennsylvania and New York. Results suggest that New York properties that were most likely to experience both the financial benefits and environmental consequences of SGD dropped in value 23% as a result of the moratorium, which under certain assumptions indicates a large and positive net valuation of SGD.