Infrastructure, land prices and the environment in developing economies

by Hongjia Zhu

Institution: University of New South Wales
Department: Economics
Year: 2014
Keywords: Environment; Infrastructure; Land market
Record ID: 1031899
Full text PDF: http://handle.unsw.edu.au/1959.4/53864


This thesis presents contributions on the economic impacts of energy infrastructure constraints and air pollution in the developing world. I begin by investigating the impact of unreliable power supply on worker reallocation in Chinese manufacturing firms. This study contributes to the literature by highlighting the causal relationships between the quality of energy infrastructure and labour market outcomes. I find that frequent power outages significantly increase the pace at which long-term workers are reallocated. The impacts on the reallocation of temporary workers are much weaker and statistically insignificant. Evidence suggests that these impacts are driven in part by firms' decreased labour demand and the relative wages of long-term workers. In India, to cope with the poor public electricity provision problem, many enterprises install private generators. I examine whether the adoption of such private remedial infrastructure can enhance a firm's marginal profit from production capital, and consequently, increase the investment rate. Using Indian firm-level data, the key findings suggest a heterogeneous treatment effect of private generator adoption on the investment rate. That is, firms that are the least likely to install generators however would benefit the most and have a larger impact on their investment in other production capital. Traditional energy production and use results in air pollution, which is now recognized as an increasing concern for developing countries. To evaluate the economic impact of air pollution in China, I analyze the causal association between air pollution and urban land prices using a unique land conveyance dataset. To address the endogeneity issue of air pollution, I exploit the systematic effects of the interactions between atmospheric circulation and topographical features on the dispersion of local air pollutants. Results suggest that air pollution significantly influences land prices. Each 1% increase in average annual air pollution reduces urban land prices by approximately 1.4%. These effects vary across land types: there is a large and negative effect on residential land, but the effects on industrial or commercial land are both small and positive.