China's Rising Demand for "Green Cities": Evidence from Cross-City Real Estate Price Hedonics
AbstractWith the decline of the traditional hukou system, migrants in China have a broad set of cities to choose from. Within an open system of cities, compensating differentials theory predicts that local real estate prices will reflect the marginal valuation of non-market local public goods. More polluted cities will feature lower real estate prices. But, local pollution may be caused by booming local industries. To address such endogeneity concerns, we estimate hedonic regressions using an instrumental variable strategy based on “imports” of pollution from nearby sources. By documenting the importance of spatial emissions patterns, our study highlights how real estate prices in one city are affected by Pigouvian externalities originating in another location. On average, a 10% decrease in imported neighbor pollution is associated with a 1.8% increase in local home prices.
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Date of creation: Apr 2011
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Find related papers by JEL classification:
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-07 (All new papers)
- NEP-DEV-2011-05-07 (Development)
- NEP-ENE-2011-05-07 (Energy Economics)
- NEP-ENV-2011-05-07 (Environmental Economics)
- NEP-GEO-2011-05-07 (Economic Geography)
- NEP-RES-2011-05-07 (Resource Economics)
- NEP-TRA-2011-05-07 (Transition Economics)
- NEP-URE-2011-05-07 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Siqi Zheng & Matthew E. Kahn & Hongyu Liu, 2009.
"Towards a System of Open Cities in China: Home Prices, FDI Flows and Air Quality in 35 Major Cities,"
NBER Working Papers
14751, National Bureau of Economic Research, Inc.
- Zheng, Siqi & Kahn, Matthew E. & Liu, Hongyu, 2010. "Towards a system of open cities in China: Home prices, FDI flows and air quality in 35 major cities," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 1-10, January.
- 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.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- China's Future Green Cities
by Matthew E. Kahn in Environmental and Urban Economics on 2011-12-02 16:10:00
- Green People Power in China
by Matthew E. Kahn in The Reality-Based Community on 2012-10-28 22:09:57
- My Harvard Business Review Blog Piece on China's Bullet Trains and a History of My Economic Thought About China
by Matthew Kahn in Environmental and Urban Economics on 2013-04-08 15:50:00
- Exploring Green Cities in China
by Matthew Kahn in Urbanization Project on 2013-04-09 23:17:09
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