Does air pollution affect urban housing prices? Evidence from 285 Chinese prefecture-level cities

By applying panel data obtained for 285 prefecture-level cities in China from 2005 to 2019, in this paper, we employ the spatial Durbin model to estimate the spatial spillover effects of air pollution on housing prices among neighboring cities. The empirical estimations show that, first, housing prices and PM2.5 concentrations present a significantly positive spatial autocorrelation, implying that significant spatial agglomeration exists among the studied cities. Then, regarding the spatial heterogeneity of air pollution's capitalization effects, we found that air pollution shows a significantly positive relationship with local house prices in large cities and a negative rela-tionship with local house prices in small and medium-sized cities. Additionally, air pollution exerts significantly negative impacts on housing prices in western China but shows no significance in the eastern or central regions. In addition, air pollution exhibits negative capitalization effects on housing values in northern and southern China, and the magnitude of the estimated coefficient in the southern region is smaller than that in the northern region. These findings are robust to an alternating spatial matrix and the explanatory indicators. Our empirical results can help the government develop recommendations for environmental governance and household loca-tion choice in China.