Residential property price differentials of waste plants: evidence from Beijing, China

ABSTRACT

As a primary source of urban pollution, waste plants release toxic gases and polluted waste water that can cause great harm to human health and contaminate water resources. The adverse impact of waste plants on environmental threaten the quality of life of surrounding residents which will be reflected in residential property values. In this study, we develop a hedonic price model to estimate the environmental externalities of waste plants based on a panel dataset for real-estate transactions in Beijing from 2011 to 2015. We apply fixed effects and a Heckman selection model to control for omitted variable bias and sample selection bias and then construct price counterfactuals for properties. The price differentials between expected and counterfactual prices are then calculated. Our empirical results suggest that waste plants negatively influence residential property prices. Additionally, the influences of other factors, such as school district, traffic convenience, and average housing area, on property prices are consistent with common sense, though they are weakened for properties within three kilometers of waste plants.

KEYWORDS:

• Waste plant
• hedonic price model
• Heckman selection model
• environmental externality
• counterfactual price

JEL CLASSIFICATION:

• C33
• Q51

Acknowledgments

This research was supported by Science Foundation of China University of Petroleum, Beijing (No. 2462017YJRC007 and No. 2462017YJRC049), and National Natural Science Foundation of China (No. 71703166 and No. 71803192). We acknowledge Wallace Academic Editing for editing the manuscript.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71703166,71803192];Science Foundation of China University of Petroleum, Beijing [2462017YJRC007,2462017YJRC049].