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  3. 2024
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  5. Race, Place and Pollution: Environmental and Social Inequality in the United States
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Race, Place and Pollution: Environmental and Social Inequality in the United States

Paper Session

Saturday, Jan. 6, 2024 8:00 AM - 10:00 AM (CST)

Grand Hyatt, Bonham D
Hosted By: Association of Environmental and Resource Economists
  • Chair: Beia Spiller, Resources for the Future

Does Improving the Local Environment Narrow or Widen Inequality?

Danae Hernandez-Cortes
,
Arizona State University
Kyle Meng
,
University of California-Santa Barbara
Christopher Timmins
,
University of Wisconsin
Paige Weber
,
University of California-Berkeley

Abstract

Minority and low-income individuals face a disproportionate share of pollution burdens, a disparity which environmental policies have the potential to narrow. However, it is unclear whether such policies would reduce overall welfare inequality: if improvements in the environment increase housing prices and induce out-migration of minority and low-income individuals, welfare and environmental quality could decrease relatively for individuals that are in ex-ante heavily polluted areas. This paper estimates the welfare inequality consequences of recent air quality improvements across the U.S. and analyzes counterfactual environmental policies. We first use detailed data on electricity generating unit emissions and a pollution dispersal model to examine changes in the spatial distribution of PM2.5 pollution concentrations from spatially- and temporally-differentiated fracking of natural gas in the U.S. To enable a welfare interpretation, we then combine these pollution changes with the migration histories of the near-universe of U.S. residents in a discrete choice model of residential location, estimated in a manner that quantifies welfare changes inclusive of all possible sorting-induced housing price and amenity changes that result from air quality improvements, both locally and remotely. We apply this framework to quantify relative welfare changes by race and income across a variety of environmental policies. In doing so, we compare the efficacy of alternative environmental policies in terms of both pollution disparities and overall welfare disparities, inclusive of changes in housing prices, other amenities, and residential locations.

Income, Wealth, and Environmental Inequality in the United States

Jonathan Colmer
,
University of Virginia
John Voorheis
,
U.S. Census Bureau

Abstract

It is well-established that disadvantaged communities are disproportionately exposed to environmental risk. However, much of the existing research exploits differences in exposure across geographic locations rather than between people. We present new findings on how the distribution of exposure to environmental hazards has evolved over time using a new microdata infrastructure that allows us to follow the near population of the United States over time and space for the last two decades. We show that aggregate geographic analyses, even at the Census tract level, can lead to misleading conclusions about individuals and groups, a problem known as the ecological fallacy. Our findings highlight the importance of moving from a place-based to a person-based understanding of environmental inequality.

Racial Housing Price Differentials, Neighborhood Segregation, and Flood Risk in the U.S. Housing Market

Sébastien Box-Couillard
,
University of Illinois-Urbana-Champaign
Peter Christensen
,
University of Illinois-Urbana-Champaign

Abstract

We report evidence from the largest study of racial price differentials in the U.S. housing market, constructing a panel of repeat sales that includes approximately 43 million unique transactions across over 20 million property transactions between 2000-2020. We find that while price premiums facing Black and Hispanic home buyers are virtually ubiquitous in U.S. markets, there is substantial heterogeneity in their magnitude. Consistent with predictions from theoretical models stemming from Becker (1957), we find that premiums are higher in supply-constrained markets and in “hot” housing markets, where discrimination is likely to be less costly for a seller. We then examine the effects of neighborhood segregation, which could introduce a price differential by constraining the set of neighborhoods in which Black buyers search for housing. Leveraging exogenous variation in racial segregation introduced by the historical placement of railroad tracks, we find that residential segregation arising at the end of the 19th and throughout the 20th century has a strong positive effect on price premiums paid by Black home buyers during the period 2000-2020. Our estimates indicate that a one standard deviation reduction in the level of a city’s segregation would almost eliminate the price premium for Black homebuyers. We also find evidence of important interactions with seller race. Non-white buyers tend to purchase properties at a discount from a seller from the same racial/ethnic group, but purchase at a premium when transacting with a seller from a different group. We link our transactions data to FEMA flood maps and show that premiums for Black and Hispanic homebuyers are lower in high-risk flood zones than outside high flood-risk areas, potentially incentivizing Black and Hispanic buyers to purchase homes in areas more likely to be flooded.

Discussant(s)
Beia Spiller
,
Resources For the Future
Spencer Banzhaf
,
North Carolina State University
Samuel Stolper
,
University of Michigan
JEL Classifications
  • Q5 - Environmental Economics
  • R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location