Are environmental punishments good news or bad news? Evidence from China

Sumit Agarwal, Yanhao Ding, Weida Kuang and Xiao Zhu

Journal of Environmental Economics and Management, 2023, vol. 120, issue C

Abstract: This paper exploits the information disclosure and dissemination of environmental punishments on housing prices. As environmental quality is hardly ameliorated in the short run, the environmental punishments normally convey bad news of environmental quality rather than good news to housing market. The information disclosure of environmental punishment adds new pollution source information to the public. Employing the micro databases of firm-level environmental punishments and housing resale transactions in Beijing from January 2015 to December 2017, this research reveals that the transaction prices of houses within 0.5 km distance from the environmentally punished firms decrease by 1.84% on average and the overlapping effects of environmental punishments are fortified by multiple environmental punishments. In addition, the negative effects are amplified in the heating seasons and in the national important events. Unfortunately, we find little evidence of environmental punishments in the rental housing market. This paper identifies three mechanisms of environmental punishments on housing prices. The first mechanism is information disclosure, which proves that the impacts of environmental punishments on housing prices magnify if the information of environmental punishments is released to the public and reinforce with environmental information searching. The second mechanism is information dissemination, which corroborates that the negative effects of environmental punishments on housing transaction prices decay with distance and over time. The third mechanism is health concern arising from environmental punishments, which documents that relative to the unmarried young homebuyers, the older homebuyers and homebuyers with children have stronger responses to the environmental punishments.

Keywords: Environmental punishments; Housing transaction prices; Information disclosure; Information dissemination; Health concern (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:120:y:2023:i:c:s0095069623000657

DOI: 10.1016/j.jeem.2023.102847

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