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Estimating the implicit price elasticity of the demand for air quality: A hedonic approach

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  • Zhu, Tianyun

Abstract

I propose a novel approach which yields a likelihood-based estimator for the implicit price elasticity of demand for avoiding air pollution exposure. Applying my approach to a cross-sectional hedonic data set of Cleveland MSA, I find that the estimate on the implicit price elasticity of interest is approximately 0.03, smaller in magnitude than the national estimates obtained by prior studies. Beyond estimating the implicit price elasticity of demand for avoiding air pollution, my approach also allows for nonparametric characterization of the sorting equilibrium and full recovery of the bid function for each household type that sorts into an observed air quality level, which makes it possible to implement counterfactural welfare analysis of a non-marginal change in air quality.

Suggested Citation

  • Zhu, Tianyun, 2025. "Estimating the implicit price elasticity of the demand for air quality: A hedonic approach," Journal of Housing Economics, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:jhouse:v:67:y:2025:i:c:s1051137724000585
    DOI: 10.1016/j.jhe.2024.102039
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    More about this item

    Keywords

    Hedonic demand; Air quality; Sorting; Willingness to pay;
    All these keywords.

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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