Wheels of Fortune: Subway Expansion and Property Values in Beijing

40 Pages Posted: 9 Sep 2014 Last revised: 19 May 2016

See all articles by Shanjun Li

Shanjun Li

Cornell University - School of Applied Economics and Management

Jun Yang

Beijing University

Ping Qin

Göteborg University - School of Business, Economics and Law

Shun Chonabayashi

Cornell University; World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: September 8, 2014

Abstract

China is experiencing rapid urbanization. Its capital city, Beijing, experienced a 53 percent increase in population from 2001 to 2013. To address traffic congestion and air pollution, two of the most pressing urban challenges, Beijing has been investing heavily in transportation infrastructure. In particular, the subway system added 15 new subway lines with a total length of 410 km of over the 12-year period. We quantify the capitalization of large-scale subway construction into property values in a first-differenced hedonic price framework while controlling for confounding factors and reverse causality. Our analysis finds a positive and significant impact of subway proximity on property values: a reduction in the distance to a subway station by 1 km increases the value of properties within 3 km of the station by 15 percent, and by 3.4 percent for properties within 3 to 5 km. Our analysis shows that the increase in property values can more than cover the capital cost of subway construction.

Keywords: Subway, Property Values, Hedonic Method, Infrastructure Funding

JEL Classification: R31, R42, H41

Suggested Citation

Li, Shanjun and Yang, Jun and Qin, Ping and Chonabayashi, Shun, Wheels of Fortune: Subway Expansion and Property Values in Beijing (September 8, 2014). Available at SSRN: https://ssrn.com/abstract=2493311 or http://dx.doi.org/10.2139/ssrn.2493311

Shanjun Li (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Jun Yang

Beijing University ( email )

Beijing, 100871
China

Ping Qin

Göteborg University - School of Business, Economics and Law

Vasagatan 1
Goteborg, 40530
Sweden

Shun Chonabayashi

Cornell University ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://sites.google.com/a/cornell.edu/shunchonabayashi

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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