Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions
AbstractDemand 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.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7557.
Length: 68 pages
Date of creation: Aug 2013
Date of revision:
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Other versions of this item:
- Olivier Deschenes & Michael Greenstone & Joseph S. Shapiro, 2012. "Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions," NBER Working Papers 18267, National Bureau of Economic Research, Inc.
- H4 - Public Economics - - Publicly Provided Goods
- I1 - Health, Education, and Welfare - - Health
- Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
- D1 - Microeconomics - - Household Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-06 (All new papers)
- NEP-ENE-2013-09-06 (Energy Economics)
- NEP-ENV-2013-09-06 (Environmental Economics)
- NEP-REG-2013-09-06 (Regulation)
- NEP-RES-2013-09-06 (Resource Economics)
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