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|
|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|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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