Market Approaches to the Measurement of the Benefits of Air Pollution Abatement
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Description
This paper summarizes some recent evidence concerning the nature of air-pollution-control benefits that can be obtained from property-value data and assesses the theoretical and empirical difficulties that are inherent in such studies. Despite the rather substantial list of complexities involved, these recent results are quite promising from a policy viewpoint. Not only are quantitative estimates of the benefits of reductions in air pollution concentrations obtained, but more important, quantitative estimates of the sensitivity of the results to some of the underlying assumptions are also available. As a consequence, policy makers should have sufficient perspective to make proper use of the numbers that are available. Even a crude guess about the facts, with the appropriate caveats, should be more useful than a guess based purely on whim. This guarded optimism must be qualified in one important respect, however. The results of the study are discouraging in that they suggest that property-value studies are likely to fail at providing policy makers with a list of benefits associated with the reduction of concentration levels of individual pollutants. Further information is likely to be necessary if reasonable guesses are to be made along these lines. The organization of this paper is as follows. The first section discusses in some detail the conceptual issues involved in the market studies. An examination of the extent to which property-value studies can be utilized to estimate individual households’ willingness to pay for both small and large improvements in air quality in one urban area and throughout the United States leads into an analysis of the conditions under which wage-rate differentials can be used to estimate benefits and the relationship between the wage-rate and property-value approaches. The second major section considers the empirical results of property-value studies. Rather than reviewing a long list of studies that are not comparable, the section provides a focus by concentrating on the recent analysis of a data set for the Boston metropolitan area. This focus allows estimates to be obtained for the magnitude of some of the biases that arise in the property-value studies. The objective is to obtain some reasonable statistical bounds for the property-value-related benefits of an improved environment and to see to what extent these benefits can be attributed to improvements in specific pollutant levels. The final section summarizes the major conclusions.
Source Publication
Approaches to Controlling Air Pollution
Source Editors/Authors
Ann Fetter Friedlaender
Publication Date
1978
Recommended Citation
Rubinfeld, Daniel L., "Market Approaches to the Measurement of the Benefits of Air Pollution Abatement" (1978). Faculty Chapters. 1877.
https://gretchen.law.nyu.edu/fac-chapt/1877
