Migration and hedonic valuation: The case of air quality

Conventional hedonic techniques for estimating the value of local amenities rely on the assumption that households move freely among locations. We show that when moving is costly, the variation in housing prices and wages across locations may no longer reflect the value of differences in local amenities. We develop an alternative discrete-choice approach that models the household location decision directly, and we apply it to the case of air quality in US metro areas in 1990 and 2000. Because air pollution is likely to be correlated with unobservable local characteristics such as economic activity, we instrument for air quality using the contribution of distant sources to local pollution-excluding emissions from local sources, which are most likely to be correlated with local conditions. Our model yields an estimated elasticity of willingness to pay with respect to air quality of 0.34-0.42. These estimates imply that the median household would pay $149-$185 (in constant 1982-1984 dollars) for a one-unit reduction in average ambient concentrations of particulate matter. These estimates are three times greater than the marginal willingness to pay estimated by a conventional hedonic model using the same data. Our results are robust to a range of covariates, instrumenting strategies, and functional form assumptions. The findings also confirm the importance of instrumenting for local air pollution. © 2009 Elsevier Inc. All rights reserved.

Air pollution, Fuel Usage and Health Outcomes in Madre de Dios, Peru: a Comparative Cross Sectional Study

Air pollution is a common problem. Particulate matter generated from air pollution has been tied to adverse health outcomes associated with cardiovascular disease. Biomass fuels are a specific contributor to increased particulate matter and arise as a result of indoor heating, cook stoves and indoor food preparation. This is a two part cross sectional study looking at communities in the Madre de Dios region. Survey data was collected from 9 communities along the Madre de Dios River. Individual level household PM2.5 was also collected as a means to generate average PM data stratified by fuel use. Data collection was affected by a number of outside factors, which resulted in a loss of data. Results from the cross-sectional study indicate that hypertension is not a significant source of morbidity. Obesity is prevalent and significantly associated with kitchen venting method indicating a potential relationship.