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Environmental regulation as a double-edged sword for housing markets: Evidence from the NOx Budget Trading Program

Sumit Agarwal, Yongheng Deng () and Teng Li

Journal of Environmental Economics and Management, 2019, vol. 96, issue C, 286-309

Abstract: We investigate the effects of environmental regulations on housing markets using a quasi-experimental setting—the NOx Budget Trading Program (NBP). Hedonic theory predicts that house prices should rise as pollution levels decrease. However, environmental regulations may also affect labor markets, and thus housing demand. Employing a difference-in-differences framework, we find that house prices shifted up in the regulated areas with low manufacturing intensity, whereas in the areas with high manufacturing intensity, housing markets were weakened. We also find that in high-manufacturing-intensity areas, loan application volume declined, rejection rate augmented, and the probability of loan default increased.

Keywords: NOx Budget Trading Program; Air pollution; House prices; Manufacturing intensity (search for similar items in EconPapers)
JEL-codes: Q5 Q53 (search for similar items in EconPapers)
Date: 2019
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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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