Averting expenditure and the cost of pollution

Courant, Paul N.; Porter, Richard C.

doi:10.1016/0095-0696(81)90044-9

Cited by 119 publications

(51 citation statements)

References 6 publications

(7 reference statements)

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“…A substantial literature has emerged, e.g., Courant and Porter [4] and Harrington and Portney [12], which demonstrates that under perfect certainty the marginal benefit of a reduction in a health threat is equal to the savings in self-protection expenditures necessary to maintain the lnitial health state. This result cannot be extended to the uncertainty case when self-protection influences both ex ante probability and ex post severity.…”

Section: Definitionmentioning

confidence: 99%

Risk, self-protection, and ex ante economic value

Shogren

Crocker

1991

Journal of Environmental Economics and Management

122

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We develop three propositions about the ex ante value of reduced risk. If there is a continuous outcome distribution and if self-protection influences outcome probability and severity, then: (1) unobservable utility terms cannot be eliminated from the ex ante value expressions; (2) knowledge of the convexity or the nonconvexity of dose-response functions is insufficient to sign changes in these expressions; and (3) selfprotection expenditures need not be a lower bound measure of these expressions. Therefore, many restrictions applied in recent empirical work on the economic value of risk changes are not immediately transferable to settings where endogenous risks prevail. DisciplinesBehavioral Economics If there is a continuous outcome distribution and if self-protection influences outcome probability and severity, then:(1) unobservable utility terms cannot be eliminated from the ex ante value expressions; (2) Knowledge of the convexity or the nonconvexity of dose-response functions is insufficient to sign changes in these expressions; and {3) self-protection expenditures need not be a lower bound· measure of these expressions.Therefore, many restrictions applied in recent empirical work on the economic value of risk changes are not immediately transferable to settings where endogenous risks prevail.

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Section: Definitionmentioning

confidence: 99%

Risk, self-protection, and ex ante economic value

Shogren

Crocker

1991

Journal of Environmental Economics and Management

122

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“…Much of the literature relating human health and ozone concentrations focuses on daily or weekly variation in ozone and on specific states or groups of cities; studies based on 4 An emerging empirical literature aims to measure behavioral responses, including defenses, to health-reducing environmental factors (Graff Zivin and Neidell 2009;Neidell 2009;Deschênes and Greenstone 2011;Graff Zivin, Neidell, and Schlenker 2011;Barreca et al 2015;Barreca et al 2016;Ito and Zhang 2016). An older theoretical literature analyzes defenses and WTP (Courant and Porter 1981;Bartik 1988). A small epidemiological literature, largely using samples of under 100 asthma patients, shows that asthmatics increase medication use on polluted days (Menichini and Mudu 2010).…”

mentioning

confidence: 99%

Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program

Deschênes

Greenstone

Shapiro³

2017

American Economic Review

363

156

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The demand for air quality depends on health impacts and defensive investments, but little research assesses the empirical importance of defenses. A rich quasi-experiment suggests that the Nitrogen OxidesWillingness to pay (WTP) for well-being frequently depends on factors that enter the utility function directly (e.g., the probability of mortality, school quality, local crime rates, etc.) and compensatory investments that help to determine these factors (Grossman 1972). In a wide variety of contexts, the empirical literature has almost exclusively focused on the direct effects (e.g., health outcomes) of these factors and left the defensive investments largely unmeasured. As examples, there has been little effort to measure: the use of medications or air filters to protect against poor air quality (e.g., Chay and Greenstone 2003; Currie and Neidell 2005); parental expenditures on supplemental tutoring to improve educational outcomes for their children; or the costs of alarm systems and additional security to protect against crime. All of these defensive investments are costly and displace consumption of utility-generating goods. Indeed, economic theory suggests that these actions * Deschênes: Department of Economics, University of California, 2127 North Hall, Santa Barbara, CA 93106, IZA, and NBER (email: olivier@econ.ucsb.edu); Greenstone: Department of Economics, University of Chicago, 1126 E. 59th Street, Chicago, IL 60637, and NBER (email: mgreenst@uchicago.edu); Shapiro: Department of Economics, Yale University, 37 Hillhouse Avenue, New Haven, CT 06511, and NBER (email: joseph.shapiro@ yale.edu). This paper was accepted to the AER under the guidance of Hilary Hoynes, Coeditor. We are grateful to numerous seminar participants and colleagues, especially Christopher Knittel, for insightful comments. Nick Muller generously helped with CRDM, Dan Feenberg, Mohan Ramanujan, and Jean Roth gave considerable help with MarketScan data,

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“…Finally, we note that while this normative literature informs our work, our concern is with positive aspects of how individual interests are shaped and the role such demands play in shaping equilibrium policy outcomes. 4 For analysis of consumer behavior in the presence of private mitigation, see Courant and Porter (1981), Shibata and Winrich (1983), Bartik (1988) and McKitrick and Collinge (2002). 5 The same qualitative effects would be present with the more general HeckscherOhlin framework, but this would come at a cost in terms of insight and clarity.…”

mentioning

confidence: 82%

Environmental regulation and trade openness in the presence of private mitigation

Hotte

Winer

2012

Journal of Development Economics

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Acknowledging the differential ability of individuals to privately mitigate the consequences of domestic pollution for their health is essential for an understanding of their demands for regulation of the environment and of trade in dirty goods, and for analysis of the implications of these demands for equilibrium policy choices. In a small open economy with exogenous policy, we first explain how private mitigation at a cost results in an unequal distribution of the health consequences of pollution in a manner consistent with epidemiologic studies, and consequently how the benefits and costs of trade in dirty goods interact with choices concerning private mitigation to further polarize the interests of citizens concerning environmental stringency. The economy is then embedded in a broader political economy setting, and simulated to investigate the role of private mitigation in shaping political equilibria. We show that when citizens can choose between mitigating the health consequences of domestic pollution privately and reducing pollution through public policy, the same polarization of interests underlies equilibrium policy choices in both democratic and autocratic regimes.

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Averting expenditure and the cost of pollution

Cited by 119 publications

References 6 publications

Risk, self-protection, and ex ante economic value

Risk, self-protection, and ex ante economic value

Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program

Environmental regulation and trade openness in the presence of private mitigation

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