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Equilibrium Welfare Impacts of the 1990 Clean Air Act Amendments in the Los Angeles Area


  • Tra, Constant I.


This study develops a discrete choice locational equilibrium model to evaluate the benefits of the air quality improvements that occurred in the Los Angeles area following the 1990 Clean Air Act Amendments (CAAA). The discrete choice equilibrium approach accounts for the fact that air quality improvements brought about by the 1990 CAAA will change housing choices and prices. The study provides the first application of the discrete choice equilibrium framework (Anas, 1980, Bayer et al., 2005) to the valuation of large environmental changes. The study also provides new evidence for the distributional welfare impacts of the 1990 CAAA in the Los Angeles area. Households’ location choices are modeled according to the random utility framework of McFadden (1973) and the differentiated product specification of Berry, Levinsohn and Pakes (1995). Findings suggest that the air quality improvements that occurred in the Los Angeles area between 1990 and 2000 provided an average equilibrium welfare benefit of $1,800 to households. In contrast, average benefits are $1,400 when equilibrium price effects are not accounted, demonstrating that ignoring equilibrium effects will likely underestimate the benefits of large environmental changes. In addition, we find that the equilibrium welfare impacts of the 1990 CAAA in the Los Angeles area varied significantly across income groups.

Suggested Citation

  • Tra, Constant I., 2007. "Equilibrium Welfare Impacts of the 1990 Clean Air Act Amendments in the Los Angeles Area," Working Papers 7341, University of Maryland, Department of Agricultural and Resource Economics.
  • Handle: RePEc:ags:umdrwp:7341

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    References listed on IDEAS

    1. Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, 2004. "Estimating The General Equilibrium Benefits Of Large Changes In Spatially Delineated Public Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1047-1077, November.
    2. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
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    Cited by:

    1. Constant I. Tra, 2013. "Measuring the General Equilibrium Benefits of Air Quality Regulation in Small Urban Areas," Land Economics, University of Wisconsin Press, vol. 89(2), pages 291-307.
    2. Constant Tra, 2009. "Title: A Discrete Choice Equilibrium Approach to Valuing Large Environmental Changes," Working Papers 0922, University of Nevada, Las Vegas , Department of Economics.

    More about this item


    benefit analysis; ozone improvement; locational equilibrium; discrete choice; Environmental Economics and Policy; H0; Q28; R13; R21;

    JEL classification:

    • H0 - Public Economics - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand


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