The value of air quality and crime in Chile: a hedonic wage approach

Abstract

We estimate the implicit prices of the crime rate and airborne pollution in Chile, using spatially compensating price differentials in the housing and labor markets. We evaluate empirically the impact of different estimation strategies for the wage and rent equations, on the economic value of these two amenities. The results show that increments in the crime rate or in air pollution have a negative impact on welfare and that the estimated welfare measures and their variances are sensitive to selection bias, endogenous amenities and clustering effects. In contrast, the welfare measures do not seem to be very sensitive to the simultaneity bias.

How does air pollution affect housing rental prices in Chile? An economic assessment of PM2.5 concentration across Chilean communes

“…In Chile, Lavín et al . (2011), considering 44 communes, has found an average MWTP between US$3 and US$6 for the reduction in PM 10 , values rather low compared with the present estimates 16…”

“…For example, Lavín et al . (2011) examine air pollution in 44 communes, while Mendoza et al . (2019), using the life satisfaction approach to compute people's willingness to pay for reduced air pollution in Chile, focus on 70 municipalities.…”

“…To meet this objective, following the precedent of Lavín et al . (2011), we employ the spatial equilibrium approach (Rosen, 1979; Roback, 1982) but focus solely on the housing market 2 . Under this model, the housing market capitalizes site-specific differences on (dis)amenities (e.g., PM 2.5 ); therefore, city differences in housing rental prices – after controlling for structural attributes – reflect site characteristics, which affect the wellbeing of residents.…”

Pollution and the choice of where to work and live within Mexico City

“…Since our data include the actual monthly mortgage payment for each household, we use that. Similarly, Lavín et al (2011) use monthly rental costs for their study on Chile. Bayer et al (2009) use the average share of income that a typical US household spends on housing (0.2).…”

“…Chakraborti et al (2019) estimate land values within Mexico City and find a marginal WTP of US$ 231.77 per average land parcel. For Chile, Lavín et al (2011) estimate an inter-city hedonic approach that includes both the housing and labor markets, and find a monthly value of a marginal improvement in air quality between US$ 3 and 6. Carriazo and Gomez-Mahecha (2018) construct a demand function for air quality in Bogotá, Colombia, and estimate a willingness to pay of US$ 12.16 per month per household.…”