Assessing the direct and indirect impacts of breeding activities on residential values: a spatial hedonic approach in Brittany

Agriculture contributes to the production of a large range of externalities. Their valuation is a critical issue for the design of agro-environmental policies. Hedonic pricing method allows for such valuation using house prices and attributes. However, several endogenous biases affect the estimation. Some of these biases are due to spatial effects, which arise when observations are spatially correlated. The objective of the paper is to apply latest developments of spatial econometrics on a hedonic model to estimate the value of agricultural externalities from Brittany (France). We focused especially on externalities from breeding. We distinguish between direct and spatially indirect impacts of nitrogen pollution, but also on green algae presence, i.e. a nitrogen-related pollution arising on Breton seacoasts for years. Using a database of 8,075 transactions from 2010 to 2012, we run several linear and spatial hedonic models. A Spatial Durbin Error Model (SDEM) is selected as the best model. Our estimations reveal that swine and poultry breedings reduce house prices while cattle breeding has almost no impact on house prices. We highlight that the pollution from swine and poultry overlaps from the municipality where the production occurs. The green algae pollution of the closest beach decreases houses prices by 13.5%. Acknowledgement : This research was funded by the EU s Horizon 2020 program under grant agreement n 633838 (PROVIDE project, http://www.provide-project.eu/). This work does not necessarily reflect the view of the EU and in no way anticipates the Commission s future policy.