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The price of indoor air pollution: evidence from risk maps and the housing market

Author

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  • Pinchbeck, Edward W.
  • Roth, Sefi
  • Szumilo, Nikodem
  • Vanino, Enrico

Abstract

This study uses the housing market to examine the costs of indoor air pollution. We focus on radon, a common indoor air pollutant which is the leading cause of lung cancer after smoking. For identification, we exploit a natural experiment whereby a risk map update in England induces exogenous variation in published pollution risk levels. We find a significant negative relationship between changes in published pollution risk levels and residential property prices. Interestingly, we do not find a symmetric effect for decreasing risk. We also show that the update of the risk map led higher socioeconomic groups (SEGs) to move away from affected areas, attracting lower SEG residents via lower prices. Overall, our results demonstrate that indoor air quality has material economic effects on the housing market and provide novel policy-relevant insights into how the market responds to information on environmental risks.

Suggested Citation

  • Pinchbeck, Edward W. & Roth, Sefi & Szumilo, Nikodem & Vanino, Enrico, 2023. "The price of indoor air pollution: evidence from risk maps and the housing market," LSE Research Online Documents on Economics 118450, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:118450
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    File URL: http://eprints.lse.ac.uk/118450/
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    More about this item

    Keywords

    indoor air pollution; neighbourhood sorting; house prices; risk information; radon;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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