Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89960
Authors: 
Deschenes, Olivier
Greenstone, Michael
Shapiro, Joseph S.
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7557
Abstract: 
Demand for air quality depends on health impacts and defensive investments that improve health, but little research assesses the empirical importance of defenses. We study an important cap-and-trade market, which dramatically reduced NOx emissions, a key ingredient in ozone formation. A rich quasi-experiment reveals that it decreased summertime ozone, pharmaceutical expenditures, and mortality rates. Reductions in pharmaceutical purchases and mortality are each valued at $900 million annually, suggesting that defensive investments are a substantial portion of willingness-to-pay. We cautiously conclude that ozone reductions are the primary channel for these effects, implying that ozone's costs are larger than previously understood.
Subjects: 
pharmaceuticals
ozone
cap and trade
willingness to pay for air quality
mortality
compensatory behavior
human health
JEL: 
H4
I1
Q4
Q5
D1
Document Type: 
Working Paper

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