The Green Premium: Environmental Regulation, Environmental Risk and Property Value

This paper estimates the effect of the closure and relocation of chemical enterprises along the Yangtze River on housing prices in China. With a difference-in-differences (DiD) model and detailed data on polluting enterprises, house transactions, and environmental complaints, we find that environmental regulation led to a 1.7% increase in housing prices and a 43.3% reduction in perceived environmental risks, as measured by environmental complaints from surrounding residents. In addition, we observe a greater change in property values among taller buildings than among shorter buildings. This paper elucidates how developing countries can benefit from environmental regulation by influencing residents’ risk perceptions.