Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259442 
Year of Publication: 
2019
Citation: 
[Journal:] Latin American Economic Review [ISSN:] 2196-436X [Volume:] 28 [Issue:] 1 [Article No.:] 11 [Publisher:] Springer [Place:] Heidelberg [Year:] 2019 [Pages:] 1-17
Publisher: 
Springer, Heidelberg
Abstract: 
Global air pollution continues to increase across the world, and Mexico City is one of the most polluted cities in the western hemisphere. This paper considers the tradeoff between wages, housing characteristics, and air quality in the conjoint decision of where a household decides to live and work. We estimate compensating differentials using a three-stage least squares (3SLS) instrumental variable approach that accounts for the simultaneous nature of the housing and wage markets. To address endogeneity, we capitalize on the localized relationship between air pollution and rainfall. We assemble a dataset for Mexico City which includes the actual transacted value of the house, house features, household socioeconomic characteristics, particulate matter pollution (PM10) concentrations, and rainfall. Our results indicate that the average household needs to be compensated by approximately US$ 1007.54 per year to tolerate a 1 µg/m3 increase in PM10. Our estimates are on the higher end of previous studies. If estimates under-represent the value of clean air, then this discourages government policy aimed at mitigating pollution, with all its health and quality of life implications.
Subjects: 
Particulate matter (PM10)
Valuation of air quality
Wage-hedonic models
Residential sorting
Compensating diferential
Marginal willingness to pay
Mexico
Latin America
JEL: 
O1
Q5
R2
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.