Koichiro Ito, UChicago

Abstract:
This paper provides among the first revealed preference estimate of willingness to pay (WTP) for clean air in developing countries. We use product-by-store level data on air purifier sales and prices in Chinese cities with air pollution data to estimate demand for air purifiers in response to air pollution. We exploit long-run variation in air pollution created by the Huai River heating policy. Using this spatial regression discontinuity design with demand estimation for differentiated products, we estimate the WTP for removing one unit of PM10. Combining our estimates on WTP for clean air with estimates on the pollution-health relationship, we find that the lower bound of health valuation in China is substantially higher than previously understood for developing countries.