Disparities in Pollution Capitalization Rates: The Role of Direct and Systemic Discrimination

Authors:
Joshua S. Graff Zivin, University of California, San Diego
Gregor Singer, London School of Economics

Abstract:

We examine how exogenous changes in exposure to air pollution over the past two decades have altered the disparities in home values between Black and White homeowners. We find that air quality capitalization rates are significantly lower for Black homeowners. In fact, they are so much lower that, despite secular reductions in the Black-White pollution exposure gap, disparities in housing values have increased during this period. An exploration of mechanisms suggests that roughly one-quarter of this difference is the result of direct discrimination while the remaining three-quarters can be attributed to systemic discrimination through differential access to complementary amenities.