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

Kyung-Min Nam (), Yifu Ou, Euijune Kim and Siqi Zheng
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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

Environmental & Resource Economics, 2022, vol. 82, issue 2, No 4, 383-407

Abstract: 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.

Keywords: Transboundary air pollution; Particulate matter; Hedonic price model; Two-stage least squares; Korea; China (search for similar items in EconPapers)
JEL-codes: B41 C36 N55 Q53 R10 R31 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10640-022-00682-1

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