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Gobi wind blows housing price away: Willingness to pay for clean air in China

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  • Li, Jianglong
  • Sun, Shiqiang

Abstract

Economists often reply on housing market to investigate the willingness to pay for clean air, while potential endogeneity concerns pose challenges. This paper proposes an identification strategy based on the Gobi Desert dust storm, providing suitable instrumental variable for hedonic models at the house-day level in East Asia. We exploit within-Beijing and over-time variation in air pollution caused by dust storm and find that after addressing endogeneity issues, the negative impact of air pollution on housing prices strengthened nearly fivefold. Buyers in Beijing are willing to pay an additional 7.9 % in housing prices for a decrease of PM10 by 100 μg/m³, indicating that the benefits of air pollution improvement in Beijing over the past decade are >1.5 trillion yuan in the housing market. This paper also reveals that an increase in air pollution leads sellers to exhibit a higher willingness to sell, reflecting in lower listing prices, heightened bargaining power for buyers, and a shorter transaction cycle.

Suggested Citation

  • Li, Jianglong & Sun, Shiqiang, 2024. "Gobi wind blows housing price away: Willingness to pay for clean air in China," Journal of Housing Economics, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:jhouse:v:66:y:2024:i:c:s1051137724000482
    DOI: 10.1016/j.jhe.2024.102029
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