Working Paper: NBER ID: w29637
Authors: Michael L. Anderson; Minwoo Hyun; Jaecheol Lee
Abstract: Though air-quality alert systems (AQAS) cover more than 1.7 billion people worldwide, there has been little welfare analysis of these systems. This paper presents a theoretical framework for deriving lower bounds on the net benefits of an AQAS and applies it to a South Korean system currently covering over 51 million people. Estimating a regression discontinuity design, we find that an alert issuance reduced youth respiratory expenditures by 30% and adult cardiovascular expenditures by 23%. The overall system reduced externalized health expenditures by 28.6 million dollars during 2016–2017, with a minimum benefit-cost ratio of 7.1:1. Including dynamic impacts of alerts increases the minimum benefits (benefit-cost ratio) to 36.7 million dollars (9.2:1). Our findings imply that the AQAS generates significant net benefits and suggests that manipulation of air quality data, which has been observed in other contexts, may negatively impact social welfare.
Keywords: Air Quality Alert Systems; Health Expenditures; Welfare Analysis
JEL Codes: I12; I18; Q53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Issuance of an air quality alert (Q53) | Reduction in youth respiratory expenditures (H51) |
| Issuance of an air quality alert (Q53) | Reduction in adult cardiovascular expenditures (H51) |
| Issuance of an air quality alert (Q53) | Reduction in externalized health expenditures (H51) |
| Issuance of an air quality alert (Q53) | Increase in benefit-cost ratio (H43) |
| Issuance of an air quality alert (Q53) | Increase in dynamic impacts leading to higher benefit-cost ratio (O22) |