ESSAYS ON ENVIRONMENTAL RISKS, CREDIT CONSTRAINTS, AND HOUSING MARKETS
Restricted (Penn State Only)
- Author:
- Chia, Liu Ee
- Graduate Program:
- Business Administration
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- February 10, 2025
- Committee Members:
- Brent Ambrose, Program Head/Chair
Liang Peng, Major Field Member
Eva Steiner, Major Field Member
Daniel Brent, Outside Unit & Field Member
Jiro Yoshida, Major Field Member
Brent Ambrose, Chair & Dissertation Advisor - Keywords:
- Real Estate
Housing Market
Housing Prices
Air Pollution
Environmental Monitoring
Weather Shock
Credit Constraint
Small-dollar Mortgage
Credit Supply
Cash Discount - Abstract:
- This dissertation examines the interplay between housing markets, environmental risks, and credit constraints. The first chapter investigates the impacts of air quality monitoring stations on housing values. The second chapter assesses the impacts of weather shocks on industrial pollution, mortality, and property values. The third chapter analyzes the influence of small loan constraints on cash discounts and homeownership access. In Chapter 1, I investigate the economic value of environmental oversight by documenting a 1.1% increase in housing values following the establishment of a nearby air quality monitoring station. This positive price effect is attributed to improvements in air quality surrounding the monitoring stations after their establishment, as I demonstrate a 46.7% reduction in toxic emissions and a 2.6% decrease in the number of industrial facilities in the area subject to air quality monitoring. Conservative estimates suggest that the value of monitoring stations exceeds $52 billion in terms of property value increases. In Chapter 2, I analyze the impact of weather shocks on pollution and the consequential impact on mortality and property values. I find that toxic emissions from industrial facilities increase by 2.1% when exposed to abnormal weather shocks, primarily due to industrial accidents caused by physical damage from these events. I estimate that pollution surges from these shocks result in a 0.2% increase in mortality from pollution-related diseases. Furthermore, I demonstrate that these climate-induced pollution risks are reflected in property values, with homes located within 1 mile of a facility experiencing a 4.3% reduction in value for each one-standard-deviation increase in climate risk. My back-of-the-envelope calculation suggests that these risks lead to an annual property value loss of $242 million. In Chapter 3, I explore the role of credit supply in shaping housing market dynamics, specifically focusing on the increasing prevalence of all-cash transactions and their associated price discounts following the Great Financial Crisis. I document that cash discounts vary substantially across property price levels, with the largest discounts occurring in the lowest-priced properties. Using the expansion of enforcement actions on mortgage fraud post-GFC as an instrument for local small credit supply, I estimate that a one-percentage-point decrease in small loan approvals increases cash discounts by 8.4%. I find that this impact is larger in low-cost houses and disadvantaged communities. My results highlight the importance of small loan availability for wealth-building through homeownership among lower-income households and explain the observed overall decrease in relative prices for low-cost houses.