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

Pinchbeck, Edward W., Roth, Sefi, Szumilo, Nikodem and Vanino, Enrico (2021) The price of indoor air pollution: evidence from risk maps and the housing market. Grantham Research Institute on Climate Change and the Environment Working Paper Series (369). Grantham Research Institute on Climate Change and the Environment, London.

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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.

Item Type: Monograph (Working Paper)
Official URL: https://www.lse.ac.uk/granthaminstitute/publicatio...
Additional Information: © 2021 The Authors
Divisions: Geography & Environment
Grantham Research Institute
Subjects: H Social Sciences > HD Industries. Land use. Labor
G Geography. Anthropology. Recreation > GE Environmental Sciences
JEL classification: R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Date Deposited: 03 Sep 2021 14:30
Last Modified: 06 Sep 2021 12:48
URI: http://eprints.lse.ac.uk/id/eprint/111853

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