Zheng, Kahn, and Liu on property values, pollution, and Chinese cities

UCLA economist Matt Kahn has the nice manuscript along with Siqi Zheng and Hongyu Liu in Regional Science and Urban Economics: Towards a System of Open Cities in China: Home Prices, FDI Flows and Air Quality in 35 Major Cities. They have a hedonic analysis that shows a nice negative correlation between home values and particulate matter and sulfur dioxide. These are city-level regessions, though, with a limited number of observations. Their take-away point however, stands, in that it seems that at least some Chinese cities are moving from manufacturing- to service-based employment, and that there is labor sorting. I tussle with their conclusion somewhat; merely shifting away from being manufacturing regions does not itself suggest sustainability–not if the manufacturing activity simply moves and dirties another region.