Valuing Air Quality Using the Life Satisfaction Approach

“Luechinger (2007) use the sites of installation of SO2 scrubbers and prevailing wind directions to predict pollution levels. Gibbons, Machin and Silva (2008) use distances to school admissions district boundaries to predict levels of choice and competition in school markets.”

“Strong environmental and urban zoning policies that reduce pollution and increase green space also predict higher SWB (Luechinger, 2009; MacKerron & Mourato, 2009).”

“The first is life satisfaction (Welsch 2006, 2007; Rehdanz and Maddison 2008; MacKerron and Mourato 2009; Luechinger 2009, 2010; Menz 2011; Ferreira et al. 2013).”

“Societies and neighborhoods high in life satisfaction have healthier natural environments, for example, clean air and ample green space (e.g., Luechinger, 2009; White, Alcock, Wheeler, & Depledge, 2013).”

“The most recent examples are studies by Levinson (2012), Ferreira and Moro (2010), Luechinger (2009, 2010), MacKerron and Mourato (2009), and Rehdanz and Maddison (2008).”

“It has been used to value air pollution (see Welsch 2002; Luechinger 2007), terrorist activity and political violence (Frey, Luechinger and Stutzer 2006), climatic conditions (Rehdanz and Maddison 2005) and airport noise nuisance (Van Praag and Baarsma 2005).”

“SWB can also be used for assessing the consequences of cigarette taxation (Gruber and Mullainatha, 2005), air pollution (Luechinger, 2009), flooding (Luechinger and Rasacky, 2009) and the risk of terrorism (Metcalfe et al., 2011).”

“Examples are Van Praag and Baarsma (2005), assessing the effect of noise nuisance, Welsch (2002) and Luechinger (2008), estimating the effect of urban air pollution, and Luechinger and Raschky (2008), estimating the effect of flood disasters.”

“, Di Tella and MacCulloch, 2008, Luechinger, 2009, 2010, Menz and Welsch 2012) find that pollution negatively affects subjective well-being, but they use country level data or concentrate on one country only (Luechinger, 2009).”

“…(2008), Napier and Jost (2008), Powdthavee (2008), Stevenson and Wolfers (2008), Graham (2009), Daly and Wilson (2009), Devoe and Pfeffer (2009), Luechinger (2009), Daly et al. (2010), Judge, Ilies, and Dimotakis (2010), Pittau, Zelli, and Gelman (2010), Powdthavee (2010), Pfeffer (2010), Stone…”

“Similarly, Maas et al. (2006) in the Netherlands and Mitchell and Popham (2007) in England find greenspace to enhance perceived general health; the former finding the relationship to be stronger for lower-socio economic groups, with some residents such as the elderly, youth and those with low levels of education benef…”

“…literature: warmer climatic conditions, across all the specifications, and air quality, in the baseline specification, have a positive and statistically significant effect of well-being as in Frijters and van Praag (1998), Redhanz and Maddison (2005), Welsch (2002 and 2006) and Luechinger (2009).”

“24 The LSA has, for example, been used to value air pollution (Luechinger 2009, Welsch 2006), airport noise nuisance (van Praag and Baarsma 2005), terrorism (Frey et al. 2009), droughts (Carroll et al. 2009), and flood hazards (Luechinger and Raschky 2009).”

“It has also been used to determine the impact that non-market goods have on SWB (e.g., van Praag and Baarsma, 2005; Dolan and Metcalfe, 2008; Luechinger, 2009).”

“Only recently, Luechinger (2009) was able to overcome all three limitations by combining data on individual happiness (from the German SOEP) with information on SO2 emissions at the very local level from 1985 to 2003, and his results confirm the negative impact of (air) pollution on individual…”

“Wind direction has been used as an instrument for air pollution in a few studies (Luechinger, 2009; Schlenker and Walker, 2011; Deryugina et al., 2016).”

“…such as green spaces, one needs to deduce their value by other means.25 To the extent that markets are imperfect to varying degrees, wellbeing data can be used to value the externality by simply comparing those who live under varying levels of the externality (see Luechinger, 2009, for example).”

“However, as shown by Frey et al. (2009), Luechinger (2009), and Luechinger and Raschky (2009) for example, the ratios of the coefficients in the ordered model can be used to evaluate the trade-off between commuting time and income using the so-called ‘life satisfaction approach’.”

“, 2001), aircraft noise (Van Praag and Baarsma, 2005), and pollution (Luechinger, 2009), although there are by”

“However, most studies rely on aggregated air quality data spanning a rather long period, such as one year (Welsch, 2006; Luechinger, 2009, 2010; Menz and Welsch, 2010; Menz, 2011; Chen and Shi, 2013; Ambrey et al., 2014).”

“…but not limited to, the values of marriage (Blanchflower & Oswald, 2004), the extent of social network (Powdthavee, 2007a) and air quality (Luechinger, 2009), as well as the costs of marital separation (Clark & Oswald, 2002), crime (Powdthavee, 2005; Moore & Shepherd, 2006), a natural…”

“Likewise, findings for wind power could be contrasted to other avoided externalities: SO2 emissions, causing so-called acid rain (Luechinger, 2009, 2010), particulate matter, causing detrimental health impacts (Cesur et al., 2015), or nuclear power, which produces radioactive waste and is subject…”

“Thus, the overall social benefits of clean air may far exceed the health benefits presented here (Luechinger 2009).”

“(Rehdanz/Maddison, 2005, 2008, Luechinger, 2007) Before we present the research design and central findings from our study we will briefly illustrate the theoretical and empirical arguments for using the neighborhood approach.”

“If this were the case, country fixed-effects would not attract statistically significant coefficients in estimates of subjective wellbeing (Ferreira and Moro, 2010; Luechinger 2009, Oswald and Wu, 2010).”

“Generally, air pollution characteristics can change dramatically based on time, space, weather and climate (Luechinger, 2009; Schmitt, 2013).”

“…and Lachman (2002), Gabriel, Mattey, and Wascher (2003), Propper et al. (2005), Weich et al. (2005), Powdthavee (2006), Moro et al. (2008), and Luechinger (2009).3 Propper et al. (2005) and Weich et al. (2005) find little geographical variation in mental health once they control for…”

“In the domain of a healthy environment, negative factors such as air pollution are related to lower well-being (Ferreira et al., 2013), and reducing that pollution increases life satisfaction (Luechinger, 2009).”

“Consistent with earlier life satisfaction valuation literature (cf. Luechinger, 2009; van Praag and Baarsma, 2005), this finding challenges the validity of the assumption of equilibrium in housing markets, which underpins the hedonic property pricing method.”

“The data employed compares favourably with other studies that purport to employ spatially disaggregated data and yet often rely on a sparse coverage of monitoring stations and thus require substantial extrapolation (cf. Levinson, 2012; Luechinger, 2009).”

“The so-called ‘probit-adapted ordinary least squares (POLS)’ technique has been used by, e.g. Stevenson and Wolfers [24], Luechinger [19], Clark et al. [5], Luechinger et al. [20], and Geishecker [12].”

“, List and Gallet (2001) and Murphy et al. (2005). With hypothetical bias we mean the bias introduced by asking a hypothetical question and not confronting the respondent with a real situation.”

“The empirical approach using satisfaction equations is in the spirit of previous papers concerned with the valuation of intangibles, including van Praag and Baarsma (2005) on the cost of airport noise, Luechinger (2009) for air quality and Frey et al. (2009) for terrorism.”

“…and Wu 2011; Deaton 2012), unemployment (Winkelmann and Winkelmann 1998; Kassenboehmer and Haisken-DeNew 2009; Knabe et al. 2010; Luechinger et al. 2010; Marcus 2013), (relative) income (Frijters et al. 2004; Senik 2009; Clark et al. 2009; Clark and Senik 2010), or pollution (Luechinger 2009).”

“Regressions of well being on income and other determinants are also being used by researchers to value intangibles, see e.g. Luechinger (2009).”

“The effect of terrorism on happiness has been studied by Frey, Luechinger, and Stutzer (2007, 2009) and Romanov, Zussman and Zussman (2010).”

“There is also evidence that pollution effects SWB directly, and that it “plays a significant role as a predictor of inter-country and inter-temporal differences in subjective well-being” (Di Tella and MacCulloch, 2008; Levinson, 2009; Luechinger, 2009; Welsch, 2002, 2006, p. 1).”

“…been applied to several economic and societal phenomena, such as inflation and unemployment (see Frey and Stutzer 2002 for a survey), and environmental issues (e.g. Welsch 2002, 2006; Rehdanz and Madison 2005; van Praag and Barsma 2005; Luechinger 2009; Ferreira and Moro 2010; Levinson 2012).”

“…of environment policies because of its adverse health effects) concentration, measured at 400 to 500 monitoring stations throughout Germany, showed that residents living in high-pollution areas reported lower levels of life satisfaction than those living in low pollution areas (Luechinger, 2009).”

“…as a good proxy of individual utility, but it also captures the residual effect of non-measured elements (e.g., in Clark and Senik (2006) with respect to wages and job position, in Luechinger (2009) and Levinson (2012) to air pollution or in Ferreira and Moro (2010) to environmental valuation).”

“Apart from the two now frequently used methods we look after some alternative methods, recently introduced by Van Praag and Ferrer-i-Carbonell (2004) but already used by a.o. Luechinger (2009), Stevenson and Wolfers (2008c) and Pischke (2010).”

“…the value of public goods or bads for which no market prices exist (Winkelmann and Winkelmann, 1998; van Praag and Baarsma, 2005; Frey et al., 2007; Luechinger, 2009; Luechinger and Raschky, 2009; Metcalfe et al., 2011; Levinson, 2012; Ludwig et al., 2012; Bayer and Juessen, 2015; Goebel et al.,…”

“(Luechinger, 2009, and Van Praag and Baarsma, 2005).”

“, [37,38]), Urban Heat Islands (UHI) [39–41], or air pollution [42,43] provide consistent information about environmental conditions.”

“Luechinger (2009) also combines individual-level data with high resolution SO2 data (at the county level for Germany).”

“Authors such as Winkelmann and Winkelmann (1998), Senik (2004), Clark (2003) and Kassenböhmer and Haisken-DeNew (2009) recode the ordinal dependent variable into a binary variable and subsequently apply the conditional logit estimator by Chamberlain (1980).”

“Life satisfaction also appears to be a phenomenon of considerable complexity and even relatively elaborate individual-level models explain only between 4 and 9% [54], between 3 and 5% [55], between 8 and 9% [30] or about 9% of the variability in life satisfaction [38].”

“…social progress (Stiglitz et al., 2009), value non-market goods (Welsch, 2006; Rehdanz and Maddison, 2008; Carroll et al., 2009; Frey et al., 2009; Luechinger, 2009; Levin-son, 2012) and assess government policy (Diener et al., 2009; Dolan et al., 2011; Boarini et al., 2012; Dolan and Metcalfe,…”

“…equivalent income approach has been used to assess the value of climate (Brereton et al., 2008; Frijters and Van Praag, 1998), airport noise (Van Praag and Baarsma, 2005), air quality or pollution (Levinson, 2009; Luechinger, 2009; Welsch, 2006) and flood disasters (Luechinger and Raschky, 2009).”

“2 Examples of costs imposed by air pollution include: degradation of asset valuations (Chay and Greenstone, 2005), diminished quality of life (Luechinger, 2009), reduced experiential values (Carson et al.”

“Several recent papers use subjective well-being data to estimate the value of local amenities (for example, L uechinger , 2009 ; F rey et al.”

“Modeling life satisfaction as a function of income, noise, air quality or other variables is one example (e.g., Luechinger 2009; van Praag and Baarsma 2005).”

“…system (Lodovici and Bigagli 2011), PM 2 : 5 may also affect decision making by increasing the occurrence of headaches and depression (Lim et al. 2012), reducing people’s happiness and well-being (Luechinger 2009, Levinson 2012, Zheng et al. 2019) and increasing anxiety (Trushna et al. 2021).”

“…Napier and Jost (2008), Powdthavee (2008), Stevenson and Wolfers (2008), Daly and Wilson (2009), Daly et al (2010), Devoe and Pfeffer (2009), Luechinger (2009), Judge et al (2010), Pittau et al (2010), Powdthavee (2010), Pfeffer (2010), Stone et al (2010), Bell and Blanchflower (2010),…”

“A well-designed example is that of the work by Luechinger (2009) on sulphur monoxide emissions, who is able to value the well-being produced by clean air.”