The impact of air pollution on urban land price and willingness to pay for clean air - Evidence from micro level land transactions in China

Abstract

We investigate the impact of air pollution on land prices by combining Chinese micro level land transaction data and PM2.5 concentrations grid data, and evaluate the marginal willingness to pay (MWTP) for clean air through the hedonic price model. The empirical results show that air quality improvement significantly increases the land unit price, and the MWTP value for clean air is estimated to be USD 32.08–33.13/m2 after controlling for variables related to both parcel characteristics and a series of facilities of general interest. Considering the differences in terms of different land use types and administrative levels of cities, the MWTP for clean air is found to exhibit significant heterogeneity both within and between cities. Specifically, the MWTP value of commercial and residential land is significantly higher than that of industrial land, and the value of ordinary prefecture-level cities is much lower than that of municipalities directly under the central government, cities specifically designated in the state plan and provincial capital cities. In addition, mechanism tests suggest that population mobility is a key channel through which changes in land prices reflect the value of clean air. This study provides a new idea for future use of hedonic price model to estimate willingness to pay for public goods such as clean air from the perspective of China's land transaction market, and also provides a reference for policy makers to formulate relevant policies.