Estimating the implicit price elasticity of the demand for air quality: A hedonic approach

Tianyun Zhu

Journal of Housing Economics, 2025, vol. 67, issue C

Abstract: I propose a novel approach which yields a likelihood-based estimator for the implicit price elasticity of demand for avoiding air pollution exposure. Applying my approach to a cross-sectional hedonic data set of Cleveland MSA, I find that the estimate on the implicit price elasticity of interest is approximately 0.03, smaller in magnitude than the national estimates obtained by prior studies. Beyond estimating the implicit price elasticity of demand for avoiding air pollution, my approach also allows for nonparametric characterization of the sorting equilibrium and full recovery of the bid function for each household type that sorts into an observed air quality level, which makes it possible to implement counterfactural welfare analysis of a non-marginal change in air quality.

Keywords: Hedonic demand; Air quality; Sorting; Willingness to pay (search for similar items in EconPapers)
JEL-codes: H75 R2 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:67:y:2025:i:c:s1051137724000585

DOI: 10.1016/j.jhe.2024.102039

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