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Does air pollution affect investor cognition and land valuation? Evidence from the Chinese land market

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  • Zhonghua Huang
  • Xuejun Du

Abstract

This study investigates whether and how air pollution affects investor cognition and valuation in the land market. We find that air pollution significantly affects investor behavior and decreases the bidding prices for land, based on the daily transaction data from the Chinese primary land market. The effect of air pollution on land prices is much stronger for high unit price land parcels and private real estate developers. We exploit the quasi‐natural experiment of Huai River policy as instrument variable and find a causal effect of air pollution on cognitive bias and under valuation in the land market. We further explore the underlying mechanism and find that pollution‐induced change of cognition, mood and behavioral bias play a role. Air pollution‐induced projection bias decreases the demand and bidding price for land. Moreover, air pollution influences investors’ mood and decreases land price premiums.

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  • Zhonghua Huang & Xuejun Du, 2022. "Does air pollution affect investor cognition and land valuation? Evidence from the Chinese land market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 593-613, June.
    • Handle: RePEc:bla:reesec:v:50:y:2022:i:2:p:593-613
    DOI: 10.1111/1540-6229.12344
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    Cited by:

    1. Lan Song & Zhiji Huang, 2022. "Exploring the Effects of Industrial Land Transfer on Urban Air Quality Using a Geographically and Temporally Weighted Regression Model," IJERPH, MDPI, vol. 20(1), pages 1-20, December.
    2. Pang, Jindong & Shen, Shulin & Zhou, Ningzhe, 2024. "The Spillover effect of government relocations on economic growth in Chinese cities," Journal of Economic Behavior & Organization, Elsevier, vol. 222(C), pages 104-122.
    3. Piotr Oskar Czechowski & Anna Romanowska & Ernest Czermański & Aneta Oniszczuk-Jastrząbek & Marzena Wanagos, 2023. "An Attempt to Determine the Relationship between Air Pollution and the Real Estate Market in 2010–2020 in Gdańsk Using GLM and GRM Statistical Models," Sustainability, MDPI, vol. 15(3), pages 1-22, January.
    4. Longji Zeng & Yuandi Wang & Yajuan Deng, 2022. "How Land Transactions Affect Carbon Emissions: Evidence from China," Land, MDPI, vol. 11(5), pages 1-25, May.

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