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When Power Plants Leave Town: Environmental Quality and the Housing Market in China

Author

Listed:
  • Guoying Deng

    (Sichuan University)

  • Manuel A. Hernandez

    (IFPRI)

  • Shu Xu

    (Southwestern University of Finance and Economics)

Abstract

Air pollution is a major environmental issue in China. This paper exploits the relocation of two major power plants in a large Chinese city as a quasi-natural experiment to examine the effect of changes in the quality of the environment on the housing market. We use an extensive transaction dataset of new apartment units in the affected and neighboring areas. We find that the plants’ closure is associated with a 12–14% increase in prices and 13–31% rise in the volume of transactions in neighborhoods within five kilometers of the plants. We further observe a higher change in prices among more expensive houses. The estimated monthly aggregate effect of the closures on the local housing market is over 50 million US dollars during the first 2 years after the relocations.

Suggested Citation

  • Guoying Deng & Manuel A. Hernandez & Shu Xu, 2020. "When Power Plants Leave Town: Environmental Quality and the Housing Market in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 751-780, December.
    • Handle: RePEc:kap:enreec:v:77:y:2020:i:4:d:10.1007_s10640-020-00517-x
    DOI: 10.1007/s10640-020-00517-x
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    Cited by:

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    2. Rivera, Nathaly M. & Loveridge, Scott, 2022. "Coal-to-gas fuel switching and its effects on housing prices," Energy Economics, Elsevier, vol. 106(C).

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    More about this item

    Keywords

    Power plants; Environmental quality; Housing market; China;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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