Title: Unintended Beneficiaries of Environmental Inspections in Housing Markets

Abstract:

Environmental regulation in emerging markets often depends on local enforcement, which may be weakened by officials' incentives to protect polluting firms. We examine whether central inspections change the housing-market valuation of local pollution risk when remediation remains the responsibility of local governments. Using a comprehensive set of resale transactions from major Chinese cities and the staggered rollout of the Central Environmental Protection Inspection (CEPI), we estimate changes in the housing-price gradient around nationally monitored polluting facilities. We find that proximity to these facilities carries a significant price discount before inspection, and that this discount narrows substantially afterward. The reduction is larger in cities whose rectification plans contain more near-term or already-completed tasks and where water and air quality improve more. Our findings suggest that credible local remediation is essential to lowering perceived pollution risk and generating housing value gains for residents near polluting facilities.

Short Bio: 

Yining Shi is an Associate Professor at the University of International Business and Economics (UIBE). She earned her PhD in Finance and MSc in Risk Management and Financial Engineering from Imperial College London in 2017. Her research focuses on credit risk, real estate and risk networks. Her work has appeared in journals including the Journal of Banking & Finance, the Journal of Financial Markets, and European Financial Management. She has led research projects on China’s real estate cycles, housing-price risk, and capital-market opening and pension finance. Her research has received awards from the China Finance Academic and Policy Forum and the Financial Street Forum Annual Conference.