Economics of clean air: Valuation of reduced health risks from Household Air Pollution - A study of rural Indian households

The rate of adoption of preventive measures for avoiding environmental and health risks arising from household air pollution remains quite low in developing countries, particularly in rural areas.. To successfully implement interventions for mitigating such risks, it is necessary for policymakers to understand the public attitude and perception towards such mitigations, which is reflected in their willingness to pay for reducing such health risks. This paper takes a contingent valuation approach to estimate the willingness to pay for reduction in such health risks using a double bounded dichotomous choice approach analysing its potential determinants. Concurrently, this paper also investigates the presence and potential sources of anomalies in such model. Results suggests that the estimated mean annual willingness to pay for reduction in health risks related to household air pollution is INR 678.14, accounting for approximately 1% of annual household income. Furthermore, the results demonstrate the presence of anomalies like internal inconsistency and anchoring effect validating the existence of starting point bias. The analysis of within-sample heterogeneity of the estimated mean annual willingness to pay further enables us to recommend policies like generating public awareness about health risks from household air pollution and targeting potential beneficiaries based on observable characteristics.