Willingness to Pay for Clean Air in China

Richard Freeman, Wenquan Liang (), Ran Song and Christopher Timmins

No 24157, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a residential sorting model incorporating migration disutility to recover the implicit value of clean air in China. The model is estimated using China Population Census Data along with PM2.5 satellite data. Our study provides new evidence on the willingness to pay for air quality improvement in developing countries and is the first application of an equilibrium sorting model to the valuation of non-market amenities in China. We employ two novel instrumental variables based on coal-fired electricity generation and wind direction to address the endogeneity of local air pollution. Results suggest important differences between the residential sorting model and a conventional hedonic model, highlighting the role of moving costs and the discreteness of the choice set. Our sorting results indicate that the economic value of air quality improvement associated with a one-unit decline in PM2.5 concentration is up to $8.83 billion for all Chinese households in 2005.

JEL-codes: Q51 Q53 R23 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-big, nep-cna, nep-dcm, nep-ene, nep-env, nep-res, nep-tra and nep-ure
Note: EEE
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Citations: View citations in EconPapers (2)

Published as Richard Freeman & Wenquan Liang & Ran Song & Christopher Timmins, 2019. "Willingness to pay for clean air in China," Journal of Environmental Economics and Management, .

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