IDEAS home Printed from
   My bibliography  Save this paper

Effects of air quality on housing prices: evidence from China’s Huai River policy


  • Liu, Xinghua
  • Li, Qiang
  • Chand, Satish


Estimating the economic value of clean air is of significance to both policymakers and private individuals but its quantification has proved difficult. Of the different valuation approaches used, the classic hedonic theory predicts a negative relationship between air quality and housing prices. Existing attempts to quantify this nexus is plagued by problems of endogeneity, mainly arising from omitted variables that confound air pollution with other determinants of housing prices. We employ a regression discontinuity (RD) design to estimate the impact of air pollution on house prices across a river that demarcates regions with and without coal-fired heating emanating from the Huai River Policy. This policy was decreed by the Chinese government in the 1950s that allowed burning of coal at subsidised prices for indoor heating to only the north of the Huai River. Employing quasi-experimental variation in particulate matter of 10 micrometres or less in aerodynamic diameter (PM10) generated by this arbitrary policy and regression discontinuity (RD) design based on distance from Huai River, we estimate the local average treatment effect (LATE) to provide new evidence on the capitalization of PM10 air pollution into housing values. By using panel data of 30 large cities on either side of the river for the period 2006 to 2015, we found that 1 μg/m3 reduction in average PM10 results in an approximately 1 percent increase in housing prices. The results are robust to using parametric and nonparametric estimation methods and adjustment to a rich set of covariates.

Suggested Citation

  • Liu, Xinghua & Li, Qiang & Chand, Satish, 2019. "Effects of air quality on housing prices: evidence from China’s Huai River policy," 2019 Conference (63rd), February 12-15, 2019, Melbourne, Australia 285038, Australian Agricultural and Resource Economics Society (AARES).
  • Handle: RePEc:ags:aare19:285038

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Environmental Economics and Policy;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:ags:aare19:285038. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.