When Power Plants Leave Town: Environmental Quality and the Housing Market in China
59 Pages Posted: 29 Sep 2014 Last revised: 30 Sep 2017
Date Written: September 27, 2014
Air pollution is a major environmental issue in China. This paper exploits the relocation of two major power plants in a key city as a quasi-natural experiment to examine the effect of changes in the quality of the environment on the housing market. We use an extensive transaction dataset of new apartment units in the affected and neighboring areas. We find that the plants’ closure is associated with a 12-14% increase in prices and 13-31% rise in the volume of transactions in neighborhoods within five kilometers of the plants. We further observe a higher change in prices among more expensive houses. The estimated monthly value of the closures is over 50 million US dollars over the first two years after the relocations.
Keywords: power plants, environmental quality, housing market, China
JEL Classification: Q53, Q51, R30
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