When Power Plants Leave Town: Environmental Quality and the Housing Market in China

59 Pages Posted: 29 Sep 2014 Last revised: 30 Sep 2017

See all articles by Guoying Deng

Guoying Deng

Sichuan University

Manuel A. Hernandez

International Food Policy Research Institute (IFPRI)

Shu Xu

Southwestern University of Finance and Economics (SWUFE)

Date Written: September 27, 2014

Abstract

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

Suggested Citation

Deng, Guoying and Hernandez, Manuel A. and Xu, Shu, When Power Plants Leave Town: Environmental Quality and the Housing Market in China (September 27, 2014). Available at SSRN: https://ssrn.com/abstract=2502442 or http://dx.doi.org/10.2139/ssrn.2502442

Guoying Deng

Sichuan University ( email )

Manuel A. Hernandez

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Shu Xu (Contact Author)

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

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