Unleashing the Casual Impact of House Prices on Air Quality: Evidence from Chinese Cities

Abstract

With the rapid development of the real estate industry in China, urban air quality is inevitably affected. By using data of Chinese cities located in the Yangtze River Delta from 2009 to 2018, this paper is aim at examining the casual impact of house prices on air quality. By considering the endogenous problems, in this study, first, the birth rate of the previous six years and the area of state-owned land supply per capita in the previous year are taken as instrumental variables of house price. Second, the two-stage least squares method is used to assess the causal impact of house price on air quality. The findings of this study show that there is no significant relationship between urban house prices and air quality, and these results are obtained without considering the endogenous problem. While, after considering the endogenous problem, urban house prices showed a significant negative effect on overall air quality, especially for low administrative level cities. The increase in house prices has hindered the improvement of air quality mainly through the blind-scale expansion of real estate development investments and the inhibitory effect of innovation.