How much do we care about the air? Evidence on the value of air quality improvements

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  • How clean is clean enough? New evidence on the value of air quality improvements

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  • New paper offers interesting insight into the relationship between income and (demand for) environmental quality

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  • Benefits from cleaning the air are diminishing as the air gets cleaner; wealth likely positively affects these benefits

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How Much Do We Care About the Air? Evidence on the Value of Air Quality Improvements

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Abstract

The impact of air quality improvements on individuals' well-being has been the subject of inquiry by many scholars over the past several decades. A few hypotheses about the determinants of air quality values figure prominently in discussions about the design and reform of air quality policies. Are there diminishing returns to air quality improvements? Do the benefits rise with income? Do certain research methods or outlets tend to produce larger benefit estimates? This report attempts to explain the variation in air quality values and disentangle the methodological factors from the policy-relevant contextual ones. A meta-analysis is conducted in order to test those hypotheses. After collecting and coding over 50 empirical studies of air quality benefits, the benefits estimates are normalized and converted to a common metric for benefits of or willingness-to-pay (WTP) for air quality improvements. Enormous variation in normalized WTP is observed in the literature. Some of the results are expected, such as diminishing returns to further improvements. Other results are less expected, such as the higher values associated with peer-reviewed studies. The relationship between benefit estimates and income is less straightforward, with benefits rising in income for wealthy nations but declining in income for developing countries. These results have useful lessons for those designing air quality policy informed by how much the public benefits from improvements.

Douglas Noonan is an adjunct scholar at AEI.

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