Airport noise and house prices: A quasi-experimental design study

In this study, we investigate the benefits of reducing airport noise externalities based on a natural quasi-experiment on exogenous variation in aircraft noise from the relocated Hong Kong Kai Tak Airport in 1998. We collect housing transaction data from 1993 to 2006 in residential areas near this airport and employ the difference-in-difference method to measure the capitalization of noise externality into local house prices. Results show that the disappearance of aircraft noise leads to an average 24.43% increase in the prices of houses surrounding the airport. In addition, the influence of airport relocation decreases with the distance to the airport. These results remain consistent across various model specifications. Moreover, the prices of houses near the airport have become on the rise after the airport noise pollution has been eradicated. Our results justify the government compensation for households subjected to airport noise exposure. Quantifying the implicit price of noise pollution also helps to formulate additional appropriate compensation mechanisms and urban planning projects.