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Environmental regulation as a double-edged sword for housing markets: Evidence from the NOx Budget Trading Program

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  • Agarwal, Sumit
  • Deng, Yongheng
  • Li, Teng

Abstract

We investigate the effects of environmental regulations on housing markets using a quasi-experimental setting—the NOx Budget Trading Program (NBP). Hedonic theory predicts that house prices should rise as pollution levels decrease. However, environmental regulations may also affect labor markets, and thus housing demand. Employing a difference-in-differences framework, we find that house prices shifted up in the regulated areas with low manufacturing intensity, whereas in the areas with high manufacturing intensity, housing markets were weakened. We also find that in high-manufacturing-intensity areas, loan application volume declined, rejection rate augmented, and the probability of loan default increased.

Suggested Citation

  • Agarwal, Sumit & Deng, Yongheng & Li, Teng, 2019. "Environmental regulation as a double-edged sword for housing markets: Evidence from the NOx Budget Trading Program," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 286-309.
    • Handle: RePEc:eee:jeeman:v:96:y:2019:i:c:p:286-309
    DOI: 10.1016/j.jeem.2019.06.006
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    More about this item

    Keywords

    NOx Budget Trading Program; Air pollution; House prices; Manufacturing intensity;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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