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Inequality, information failures, and air pollution

Catherine Hausman and Samuel Stolper

Journal of Environmental Economics and Management, 2021, vol. 110, issue C

Abstract: Research spanning several disciplines has repeatedly documented disproportionate pollution exposure in low-income communities and communities of color. Among the various proposed causes of this pattern, those that have received the most attention are income inequality, discrimination, and firm costs (of inputs and regulatory compliance). We argue that an additional channel – information – is likely to play an important role in generating disparities in pollution exposure. We present multiple reasons for a tendency to underestimate pollution burdens. Using a model of housing choice, we then derive conditions under which “hidden” pollution leads to an inequality — even when all households face the same lack of information. This inequality arises when households sort according to known pollution and other disamenities, which we show are positively correlated with hidden pollution. To help bridge the gap between environmental justice and economics, we discuss the relationship between hidden information and three different distributional measures: exposure to pollution; exposure to hidden pollution; and welfare loss due to hidden pollution.

Keywords: Environmental justice; Pollution; Information; Housing demand; Equity; Inequality (search for similar items in EconPapers)
JEL-codes: D63 D83 Q53 Q56 R21 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Inequality, Information Failures, and Air Pollution (2020) Downloads
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DOI: 10.1016/j.jeem.2021.102552

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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