IDEAS home Printed from https://ideas.repec.org/a/kap/enreec/v82y2022i2d10.1007_s10640-022-00682-1.html
   My bibliography  Save this article

Air Pollution and Housing Values in Korea: A Hedonic Analysis with Long-range Transboundary Pollution as an Instrument

Author

Listed:
  • Kyung-Min Nam

    (The University of Hong Kong)

  • Yifu Ou

    (The University of Hong Kong)

  • Euijune Kim

    (Seoul National University)

  • Siqi Zheng

    (Massachusetts Institute of Technology)

Abstract

We estimate the degree and scope of PM2.5-induced negative price shock in Korea’s local housing markets, taking a two-stage hedonic approach. For the analysis, Korea’s local PM2.5 levels are treated as endogenous and are instrumented with regional air pollutants from China. We find that a unit µg/m3 PM2.5 level increase in a Korean city is associated with a 3.7% decline in local residential property value. Long-range transboundary pollution has significant effects on Korea’s local PM2.5 levels with an elasticity of 0.05. These results enrich the sparse hedonic literature on local air-quality valuation in connection to long-range transboundary pollution in East Asia. The advanced methodological features presented in our two-staged identification strategy with a novel instrument is another contribution of this paper.

Suggested Citation

  • Kyung-Min Nam & Yifu Ou & Euijune Kim & Siqi Zheng, 2022. "Air Pollution and Housing Values in Korea: A Hedonic Analysis with Long-range Transboundary Pollution as an Instrument," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(2), pages 383-407, June.
    • Handle: RePEc:kap:enreec:v:82:y:2022:i:2:d:10.1007_s10640-022-00682-1
    DOI: 10.1007/s10640-022-00682-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10640-022-00682-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10640-022-00682-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Siqi Zheng & Jing Cao & Matthew Kahn & Cong Sun, 2014. "Real Estate Valuation and Cross-Boundary Air Pollution Externalities: Evidence from Chinese Cities," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 398-414, April.
    2. Ruixue Jia & Hyejin Ku, 2019. "Is China's Pollution the Culprit for the Choking of South Korea? Evidence from the Asian Dust," The Economic Journal, Royal Economic Society, vol. 129(624), pages 3154-3188.
    3. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
    4. Kyung-Min Nam & Heeyeun Yoon, 2019. "Air pollution in East Asia and its regional and socioeconomic impacts: an introduction," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(2), pages 249-254, October.
    5. Euijune Kim & Geoffrey Hewings & Kyung-Min Nam, 2014. "Optimal Urban Population Size: National vs Local Economic Efficiency," Urban Studies, Urban Studies Journal Limited, vol. 51(2), pages 428-445, February.
    6. Freeman, Richard & Liang, Wenquan & Song, Ran & Timmins, Christopher, 2019. "Willingness to pay for clean air in China," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 188-216.
    7. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
    8. Kyung-Min Nam & Xu Zhang & Min Zhong & Eri Saikawa & Xiliang Zhang, 2019. "Health effects of ozone and particulate matter pollution in China: a province-level CGE analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(2), pages 269-293, October.
    9. Siqi Zheng & Yuming Fu & Hongyu Liu, 2009. "Demand for Urban Quality of Living in China: Evolution in Compensating Land-Rent and Wage-Rate Differentials," The Journal of Real Estate Finance and Economics, Springer, vol. 38(3), pages 194-213, April.
    10. Douglas Almond & Yuyu Chen & Michael Greenstone & Hongbin Li, 2009. "Winter Heating or Clean Air? Unintended Impacts of China's Huai River Policy," American Economic Review, American Economic Association, vol. 99(2), pages 184-190, May.
    11. Hodges, James S. & Reich, Brian J., 2010. "Adding Spatially-Correlated Errors Can Mess Up the Fixed Effect You Love," The American Statistician, American Statistical Association, vol. 64(4), pages 325-334.
    12. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
    13. Xuan Huang & Bruno Lanz, 2018. "The Value of Air Quality in Chinese Cities: Evidence from Labor and Property Market Outcomes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(4), pages 849-874, December.
    14. P. C. Cheshire & E. S. Mills (ed.), 1999. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 3, number 3.
    15. Smith, V Kerry & Huang, Ju-Chin, 1995. "Can Markets Value Air Quality? A Meta-analysis of Hedonic Property Value Models," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 209-227, February.
    16. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
    17. Sherwin Rosen, 2002. "Markets and Diversity," American Economic Review, American Economic Association, vol. 92(1), pages 1-15, March.
    18. Soonae Park & Min-Gean Park & Kyung-Min Nam, 2019. "Growth effects of fiscal decentralization with weak economic motivation: the case of South Korea," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 399-436, December.
    19. Chen, Dengke & Chen, Shiyi, 2017. "Particulate air pollution and real estate valuation: Evidence from 286 Chinese prefecture-level cities over 2004–2013," Energy Policy, Elsevier, vol. 109(C), pages 884-897.
    20. Gyourko, Joseph & Kahn, Matthew & Tracy, Joseph, 1999. "Quality of life and environmental comparisons," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 37, pages 1413-1454, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 405-465, Elsevier.
    2. Xuan Huang & Bruno Lanz, 2018. "The Value of Air Quality in Chinese Cities: Evidence from Labor and Property Market Outcomes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(4), pages 849-874, December.
    3. Siqi Zheng & Matthew E. Kahn, 2013. "Understanding China's Urban Pollution Dynamics," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 731-772, September.
    4. Huang, Daisy J. & Leung, Charles K. & Qu, Baozhi, 2015. "Do bank loans and local amenities explain Chinese urban house prices?," China Economic Review, Elsevier, vol. 34(C), pages 19-38.
    5. Siqi Zheng & Jing Cao & Matthew Kahn & Cong Sun, 2014. "Real Estate Valuation and Cross-Boundary Air Pollution Externalities: Evidence from Chinese Cities," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 398-414, April.
    6. Shi, Tie & Zhu, Wenzhang & Fu, Shihe, 2021. "Quality of life in Chinese cities," China Economic Review, Elsevier, vol. 69(C).
    7. Amini, Amirhossein & Nafari, Kaveh & Singh, Ruchi, 2022. "Effect of air pollution on house prices: Evidence from sanctions on Iran," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    8. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
    9. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    10. Banzhaf, H. Spencer & Farooque, Omar, 2013. "Interjurisdictional housing prices and spatial amenities: Which measures of housing prices reflect local public goods?," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 635-648.
    11. Andrés Ham Gonzalez, 2011. "La Calidad de Vida en los Barrios de Buenos Aires: Estimaciones Hedónicas de la Valuación de los Amenities Urbano y su Distribución Espacial," Department of Economics, Working Papers 088, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    12. Lucie Schmidt & Paul N. Courant, 2006. "Sometimes Close Is Good Enough: The Value Of Nearby Environmental Amenities," Journal of Regional Science, Wiley Blackwell, vol. 46(5), pages 931-951, December.
    13. Iris Claus & Les Oxley & Siqi Zheng & Cong Sun & Ye Qi & Matthew E. Kahn, 2014. "The Evolving Geography Of China'S Industrial Production: Implications For Pollution Dynamics And Urban Quality Of Life," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 709-724, September.
    14. Dan S. Rickman, 2014. "Assessing Regional Quality of Life: A Call for Action in Regional Science," The Review of Regional Studies, Southern Regional Science Association, vol. 44(1), pages 1-12, Spring.
    15. John Winters, 2013. "Differences in quality of life estimates using rents and home values," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(2), pages 377-409, October.
    16. Franco, Sofia F. & Cutter, W. Bowman, 2022. "The determinants of non-residential real estate values with special reference to environmental local amenities," Ecological Economics, Elsevier, vol. 201(C).
    17. Guillermo Cruces & Andres Ham & Martin Tetaz, 2008. "Quality of Life in Buenos Aires Neighborhoods: Hedonic Price Regressions and the Life Satisfaction Approach," Research Department Publications 3260, Inter-American Development Bank, Research Department.
    18. Norbert Hiller & Oliver Lerbs, 2015. "The capitalization of non-market attributes into regional housing rents and wages: evidence on German functional labor market areas," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 35(1), pages 49-72, February.
    19. Xue, Shuyu & Zhang, Bohui & Zhao, Xiaofeng, 2021. "Brain drain: The impact of air pollution on firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    20. Kuminoff, Nicolai V. & Parmeter, Christopher F. & Pope, Jaren C., 2010. "Which hedonic models can we trust to recover the marginal willingness to pay for environmental amenities?," Journal of Environmental Economics and Management, Elsevier, vol. 60(3), pages 145-160, November.

    More about this item

    Keywords

    Transboundary air pollution; Particulate matter; Hedonic price model; Two-stage least squares; Korea; China;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:82:y:2022:i:2:d:10.1007_s10640-022-00682-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.