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Induced earthquakes, compensations, and the housing market

PhD ceremony:Mr N. (Nicolas) Duran
When:May 12, 2022
Supervisor:prof. dr. J.P. (Paul) Elhorst
Co-supervisor:dr. P. (Pim) Heijnen
Where:Academy building RUG
Faculty:Economics and Business
Induced earthquakes, compensations, and the housing market

Extracting gas from the underground can induce earthquakes. People living nearby extraction sites are affected in obvious and direct ways, such as their houses getting damaged. But there can also be other, less obvious effects.In this dissertation, I study indirect and overlooked effects from earthquakes induced by gas extraction in Groningen on its housing market.

The empirical findings are that earthquakes impact house prices indirectly through the appraisal practices of real estate agents, and that the effect extended to a larger area (e.g. the effect reaches municipalities in Drenthe that border with Groningen) and a longer period (e.g. I find effects already in 2007) than previously thought. Also, house prices fell due to an increase in risk perceptions (at least 5%) and damages (at least 6%), but as well because of disincentives for repairing those damages. Lastly, houses owned by non-compensated homeowners were sold at higher prices (about 2%) after a neighbour received an earthquake-related compensation.

I also offer a solution for the difficulties in finding causal evidence using house prices as an outcome when those affect each other. This is a contribution to the debate on the usefulness of spatial econometrics in empirical research.