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The value of air quality in Chinese cities: Evidence from labor and property market outcomes

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  • Xuan Huang
  • Bruno Lanz

Abstract

Using a dual-market sorting model of workers' location decisions, this paper studies the capitalization of air pollution in wages and property prices across Chinese cities. We exploit quasi-experimental variations in particulate matter (PM10) concentration induced by a policy subsidizing coal-based winter heating in northern China, specifying a regression discontinuity design based on cities' location relative to the policy boundary. We estimate that the elasticity of wages and house prices with respect to PM10 concentration is 0.41 and -0.71 respectively. Our results are robust to the use of an alternative source of exogenous variation in PM10 concentration (sandstorms), supporting the view that the local effect we measure provides policy-relevant information on the value of air quality improvements in China.

Suggested Citation

  • Xuan Huang & Bruno Lanz, 2015. "The value of air quality in Chinese cities: Evidence from labor and property market outcomes," CIES Research Paper series 38-2015, Centre for International Environmental Studies, The Graduate Institute.
    • Handle: RePEc:gii:ciesrp:cies_rp_37
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    Cited by:

    1. Matías Fontenla & M. Ben Goodwin & Fidel Gonzalez, 2019. "Pollution and the choice of where to work and live within Mexico City," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-17, December.
    2. Nathaly M. Rivera, 2020. "Is Mining an Environmental Disamenity? Evidence from Resource Extraction Site Openings," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(3), pages 485-528, March.
    3. 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.
    4. Daxin Dong & Boyang Xu & Ning Shen & Qian He, 2021. "The Adverse Impact of Air Pollution on China’s Economic Growth," Sustainability, MDPI, vol. 13(16), pages 1-27, August.
    5. Daxin Dong & Xiaowei Xu & Yat Fung Wong, 2019. "Estimating the Impact of Air Pollution on Inbound Tourism in China: An Analysis Based on Regression Discontinuity Design," Sustainability, MDPI, vol. 11(6), pages 1-18, March.
    6. Wang, Jianing & Lee, Chyi Lin, 2022. "The value of air quality in housing markets: A comparative study of housing sale and rental markets in China," Energy Policy, Elsevier, vol. 160(C).

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    More about this item

    Keywords

    Hedonic model; Air pollution; Labor market; Housing prices; Local public goods.;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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