Escaping Air Pollution: Immigrants, Students, and Spillover Effects on Property Prices Abroad

Escaping Air Pollution: Immigrants, Students, and Spillover Effects on Property Prices Abroad
Yuk Ying Chang and Sudipto Dasgupta
Review of Finance, Volume 27, Issue 5, September 2023, Pages 1699–1741,

Recent studies document that climate and environmental risks are causing major reallocations of capital and labor as people try to reduce exposure to these risks. These studies focus on reallocation within specific countries where reliable data on migration and labor skills are available, quantifying the productivity consequences of such reallocation. In our paper, we examine cross-border migration and capital flight in response to air pollution from China, a country regarded as a major sources of toxic and greenhouse gas emissions, and show that such a process has been going on at least for the last two decades. Since data on air pollution in China is only available for a relatively short period, we construct a long time series of news about air pollution. We fit an AR(1) model to this time series, and regard the residual from this model as “abnormal air pollution news coverage” related to China (ANC). We construct ANC for news in English and in simplified Chinese, for China overall as well as for major regions. Our objective is to examine how migration of Chinese citizens to U.S. regions, the inflow of Chinese students to U.S. post-secondary educational institutions, and ultimately, residential property prices in the U.S., are affected by ANC.

We find that higher ANC is associated with more migration to U.S. Metropolitan Statistical Areas (MSAs) that have stronger historical ties to China (based on Chinese settlements as early as 1870). Language ties also play a role: for example, ANC associated with Guangdong province leads to Chinese immigration to U.S. MSAs where Cantonese is the major Chinese language spoken at home. The number of Chinese students registering for the college entrance examination (Gaokao) is lower (after controlling for the number of local senior high school graduates) when the local ANC is higher, suggesting that more seniors go abroad to study (in China, the system of registration of residency status of individuals, known as Hukou, makes it very difficult for students to take the examination in a region where they do not have Hukou). International student enrolment in U.S. institutions increase when a weighted-average ANC measure, based on Chinese city-level ANC and weights reflecting the importance of a Chinese city as a source of students to the MSA in which the institution is located, is higher. Finally, we find that higher ANC is associated with higher residential property price appreciation and housing ownership in U.S. counties with stronger historical or student links with China.

Our study makes several contributions. First, our results indicate how salient Chinese citizens consider environmental and climate change to be, about which there is conflicting evidence. This is important because of China’s position as the second most important emitter of greenhouse gases.  Second, our results are in line with recent evidence that regions with significant air pollution problems are likely to lose the more mobile skilled workers, and incur substantial economic costs. Finally, we contribute to recent research documenting that beliefs about long-term environmental or climate risk have significant effects on asset prices.

Scroll to Top