This study evaluates the cost of aircraft noise in Berlin, Germany, on the background of the home-voter hypothesis, which has received increasing attention in the literature. First, we use exogenous variation in airport noise provided by a series of effective and announced closures and extensions of airports to identify adjustments in the property market. Second, we integrate the results of the property market analysis into a spatial analysis of a direct referendum on an airport closure. Our results indicate that aircraft noise is costly. We observe significant positive market adjustments to reductions in aircraft noise. Consistently, voters supported the closure of a city airport where aircraft noise was present and positive price adjustments from a past announcement had occurred. Homeowners had significantly stronger preferences than renters, which is in line with the home-voter hypothesis. We conclude results from direct referenda on public initiatives should be interpreted with care when it comes to evaluating (expected) environmental effects.

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July 2011     Paper Number SERCDP0085

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