Working Paper: NBER ID: w22367
Authors: Koichiro Ito; Shuang Zhang
Abstract: We develop a framework to estimate willingness to pay (WTP) for clean air from defensive investment. Applying this framework to product-by-store level scanner data on air purifier sales in China, we provide among the first revealed preference estimates of WTP for clean air in developing countries. A spatial discontinuity in air pollution created by the Huai River heating policy enables us to analyze household responses to long-run exposure to pollution. Our model allows heterogeneity in preference parameters to investigate potential heterogeneity in WTP among households. We show that our estimates provide important policy implications for optimal environmental regulation.
Keywords: willingness to pay; clean air; air purifiers; China; pollution; regulation
JEL Codes: L0; Q0; Q5; Q51; Q52; Q53; Q56; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market Share of HEPA Purifiers (L68) | Willingness to Pay (WTP) for PM10 Reduction (Q52) |
| PM10 levels (Y10) | Willingness to Pay (WTP) for PM10 Reduction (Q52) |
| Income (D31) | Willingness to Pay (WTP) for PM10 Reduction (Q52) |
| Air Pollution (PM10 levels) (Q53) | Market Share of HEPA Purifiers (L68) |
| Huai River Heating Policy (Q25) | Air Pollution (PM10 levels) (Q53) |