Saturday, October 22, 2005

Chernobyl's Long Run Effects?

Risk perception plays a key role in economic decision making both for consumers and producers. Post 9/11, people were afraid to fly and the airlines lost billions. Since the Chernobyl nuclear accident in 1986, people have been afraid to live and work near "Ground Zero".

The New York Times today reports on an effort to "reclaim" land near this disaster's epicenter.

Nearly a quarter of Belarus, including some of its prime farmland, remains radioactive to some degree. Belarus'government is making an effort to put the contaminated lands back to good use.

"The farm, no longer known as the Karl Marx collective but still state-owned, reopened two years ago with the millions of dollars' worth of harvesters, tractors and other equipment provided by President Aleksandr G. Lukashenko's government.

A year before that the checkpoints that once restricted access to this region, 150 miles from Chernobyl, disappeared. Families began returning. Some had never left; all needed jobs.

A scientific study released in September by seven United Nations agencies and the World Bank concluded that Chernobyl's lasting effects on health and the environment had not proved as dire as first predicted. It recommended that the authorities in Russia, Ukraine and Belarus take steps to reverse psychological trauma caused by Chernobyl, encouraging investment and redevelopment.

Lands where agriculture was banned or severely restricted can be safe for growing crops again, the report said, using techniques to minimize the absorption of radioactive particles into produce."

IT will interest me whether agricultural products grown near the Chernobyl site will be sold in export markets. If so, will they sell for a lower price? Will consumers trust that the product is "safe"? The experts say it is safe but will consumers trust their judgement?

In the United States, there has been an interesting hedonic real estate literature that has examined home price dynamics before after a toxic waste site (a Superfund site) has been cleaned up. They counter-factual question is whether post-clean up do home prices converge back to what they "would have been" in the absence of the clean up. If people do not trust government to get the job done then even after a clean up, we would predict that home prices near the affected Superfund area would sell for a price discount because of this lack of confidence in government. (See the work of Kathy Kiel).