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The demand for air quality: evidence from the housing market in Bogotá, Colombia

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  • Carriazo, Fernando
  • Gomez-Mahecha, John Alexander

Abstract

Identifying a demand function for air quality is a key input to calculate welfare measurements of pollution abatement policies. We defined intra-urban housing submarkets to apply a Second Stage hedonic pricing model that allowed us to identify an inverse demand function for PM10 reductions in Bogotá. The monthly benefits of compliance with the U.S. Environmental Protection Agency standard (50 μg/m3 – annual average), and the far more stringent World Health Organization standard (20 μg/m3 – annual average) are valued at US$12.16 and US$189.64 per household, respectively. These values, in turn, represent about 1.35 per cent and 21.04 per cent of the average household income. The hedonic model applied hereby shows that intra-urban housing submarkets are suitable for the identification of a demand function to be used by policy makers interested in evaluating non-marginal benefits (costs) from air quality improvements (deterioration).

Suggested Citation

  • Carriazo, Fernando & Gomez-Mahecha, John Alexander, 2018. "The demand for air quality: evidence from the housing market in Bogotá, Colombia," Environment and Development Economics, Cambridge University Press, vol. 23(2), pages 121-138, April.
    • Handle: RePEc:cup:endeec:v:23:y:2018:i:02:p:121-138_00
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    Citations

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    Cited by:

    1. Ramesh Chandra Das & Tonmoy Chatterjee & Enrico Ivaldi, 2022. "Nexus between Housing Price and Magnitude of Pollution: Evidence from the Panel of Some High- and-Low Polluting Cities of the World," Sustainability, MDPI, vol. 14(15), pages 1-18, July.
    2. William F. Vásquez & Laura Beaudin, 2020. "On the use of hypothetical price data to estimate hedonic models in a developing country context," Letters in Spatial and Resource Sciences, Springer, vol. 13(3), pages 219-231, December.
    3. Matías Fontenla & M. Ben Goodwin & Fidel Gonzalez, 2019. "Pollution and the choice of where to work and live within Mexico City," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-17, December.
    4. Mahdieh Yazdani, 2021. "House Price Determinants and Market Segmentation in Boulder, Colorado: A Hedonic Price Approach," Papers 2108.02442, arXiv.org.
    5. Leiva, Benjamin & Van Houtven, George & Vásquez, William F. & Nájera, Andrea, 2023. "Valuing water service reliability and in-home water storage: A hedonic price model from Guatemala," Utilities Policy, Elsevier, vol. 82(C).
    6. Sun, Chuanwang & Yi, Xiangyu & Ma, Tiemeng & Cai, Weiyi & Wang, Wei, 2022. "Evaluating the optimal air pollution reduction rate: Evidence from the transmission mechanism of air pollution effects on public subjective well-being," Energy Policy, Elsevier, vol. 161(C).
    7. Kopczewska, Katarzyna & Ćwiakowski, Piotr, 2021. "Spatio-temporal stability of housing submarkets. Tracking spatial location of clusters of geographically weighted regression estimates of price determinants," Land Use Policy, Elsevier, vol. 103(C).
    8. Jorge A. Bonilla & Claudia Aravena & Ricardo Morales-Betancourt, 2023. "Assessing Multiple Inequalities and Air Pollution Abatement Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(3), pages 695-727, March.
    9. Runqiu Liu & Chao Yu & Canmian Liu & Jian Jiang & Jing Xu, 2018. "Impacts of Haze on Housing Prices: An Empirical Analysis Based on Data from Chengdu (China)," IJERPH, MDPI, vol. 15(6), pages 1-21, June.
    10. Hu, Zhigao & Zhang, Yan & Cao, Jianhua & Zhou, Ke, 2022. "Longing for the Blue Sky: Urban air quality and the individual decision to immigrate," Journal of Asian Economics, Elsevier, vol. 79(C).

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