Something in the Water? Testing for Groundwater Quality Information in the Housing Market

I test the level of information regarding possible groundwater contamination in the residential real estate market in Washington County, Minnesota. An approximately seven square-mile trichloroethylene plume has affected hundreds of households’ water supplies since at least 1988 in the region. I find that homeowners were initially well-informed by market forces, but were later somewhat misinformed by government actions regarding the potential of water contamination from the plume. A disclosure law passed in 2003 may have added new, low-cost, and imperfect information to the market that could explain the change in informational awareness.