China's Rising Demand for "Green Cities": Evidence from Cross-City Real Estate Price Hedonics
With 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.
|Date of creation:||Apr 2011|
|Date of revision:|
|Publication status:||published as Real Estate Valuation and Cross-Boundary Air Pollution Externalities: Evidence from Chinese Cities (joint with Cao, Zheng and Sun), Journal of Real Estate Finance and Economics, April 2013|
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- 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.
- 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.
- 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.
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