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Air Pollution and Housing Values in Korea: A Hedonic Analysis with Long-range Transboundary Pollution as an Instrument

Author

Listed:
  • Kyung-Min Nam

    (The University of Hong Kong)

  • Yifu Ou

    (The University of Hong Kong)

  • Euijune Kim

    (Seoul National University)

  • Siqi Zheng

    (Massachusetts Institute of Technology)

Abstract

We estimate the degree and scope of PM2.5-induced negative price shock in Korea’s local housing markets, taking a two-stage hedonic approach. For the analysis, Korea’s local PM2.5 levels are treated as endogenous and are instrumented with regional air pollutants from China. We find that a unit µg/m3 PM2.5 level increase in a Korean city is associated with a 3.7% decline in local residential property value. Long-range transboundary pollution has significant effects on Korea’s local PM2.5 levels with an elasticity of 0.05. These results enrich the sparse hedonic literature on local air-quality valuation in connection to long-range transboundary pollution in East Asia. The advanced methodological features presented in our two-staged identification strategy with a novel instrument is another contribution of this paper.

Suggested Citation

  • Kyung-Min Nam & Yifu Ou & Euijune Kim & Siqi Zheng, 2022. "Air Pollution and Housing Values in Korea: A Hedonic Analysis with Long-range Transboundary Pollution as an Instrument," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(2), pages 383-407, June.
    • Handle: RePEc:kap:enreec:v:82:y:2022:i:2:d:10.1007_s10640-022-00682-1
    DOI: 10.1007/s10640-022-00682-1
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Transboundary air pollution; Particulate matter; Hedonic price model; Two-stage least squares; Korea; China;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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