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

Edward Pinchbeck, Sefi Roth, Nikodem Szumilo and Enrico Vanino

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper 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 socio-economic groups (SEGs) to move away from affected areas, attracting lower SEG residents via lower prices. Finally, we develop a new theoretical framework to account for preference based sorting, which allows us to calculate that the average willingness to pay to avoid the risk of indoor air pollution is 1.6% of a property price.

Keywords: indoor air pollution; neighbourhood sorting; house prices; risk information; radon (search for similar items in EconPapers)
JEL-codes: H23 Q53 R21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-09-03
New Economics Papers: this item is included in nep-dcm, nep-ene, nep-env, nep-isf and nep-ure
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