Does Air Quality Matter? Evidence from the Housing Market

  • Chay K
  • Greenstone M
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The structure of the Clean Air Act is exploited to provide evidence on the capitalization of total suspended particulates (TSPs) air pollution into housing values. This legislation imposes strict regulations on polluters in "nonattainment" counties, which are defined by concentrations of TSPs that exceed a federally set ceiling. TSPs nonattainment status is associated with large reductions in TSPs pollution and increases in county-level housing prices. When nonattainment status is used as an instrumental variable for TSPs, it is found that the elasticity of housing values with respect to particulates concentrations ranges from -0.20 to -0.35. These estimates of the average marginal willingness to pay for clean air are robust to quasi-experimental regression discontinuity and matching specification tests. Overall, the improvements in air quality induced by the mid-1970s TSPs nonattainment designation are associated with a $45 billion aggregate increase in housing values in nonattainment counties between 1970 and 1980. [PUBLICATION ABSTRACT]

Author-supplied keywords

  • 1130:Economic theory
  • 1540:Pollution control
  • 4320:Legislation
  • 9130:Experimental/theoretical
  • 9190:United States
  • Air pollution
  • Airborne particulates
  • Business And Economics
  • Clean Air Act-US
  • Housing
  • Outdoor air quality
  • Prices
  • Studies
  • US
  • United States

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  • Kenneth Y Chay

  • Michael Greenstone

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