Environmental Punishments are Good News or Bad News? Evidence from the China’s New Environmental Law

This paper exploits the information disclosure and dissemination of environmental punishments on housing prices. As environmental quality is hardly ameliorated in the short run, the environmental punishments normally convey bad news of environmental quality rather than good news to housing market. The information disclosure of environmental punishment adds new pollution source information to the public. Employing the micro databases of firm-level environmental punishments and housing resale transactions in Beijing from January 2015 to December 2017, this research reveals that the transaction prices of houses within 0.5 kilometers distance from the environmentally punished firms decrease by 1.84% on average and the overlapping effects of environmental punishments are fortified by multiple environmental punishments. In addition, the negative effects are amplified in the heating seasons and in the national important events. Unfortunately, we find little evidence of environmental punishments in the rental housing market. This paper identifies three mechanisms of environmental punishments on housing prices. The first mechanism is information disclosure, which proves that the impacts of environmental punishments on housing prices magnify if the information of environmental punishments is released to the public. The second mechanism is information dissemination. The third mechanism is health concern arising from environmental punishments.

Agarwal, Sumit and Ding, Yanhao and kuang, weida and Zhu, Xiao, Are Environmental Punishments Good News or Bad News? Evidence from China. Available at SSRN: https://ssrn.com/abstract=4258743 or http://dx.doi.org/10.2139/ssrn.4258743