IDEAS home Printed from https://ideas.repec.org/a/spr/laecrv/v28y2019i1d10.1186_s40503-019-0072-6.html
   My bibliography  Save this article

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

Author

Listed:
  • Matías Fontenla

    (University of New Mexico)

  • M. Ben Goodwin

    (University of New Mexico)

  • Fidel Gonzalez

    (Sam Houston State University)

Abstract

Global air pollution continues to increase across the world, and Mexico City is one of the most polluted cities in the western hemisphere. This paper considers the tradeoff between wages, housing characteristics, and air quality in the conjoint decision of where a household decides to live and work. We estimate compensating differentials using a three-stage least squares (3SLS) instrumental variable approach that accounts for the simultaneous nature of the housing and wage markets. To address endogeneity, we capitalize on the localized relationship between air pollution and rainfall. We assemble a dataset for Mexico City which includes the actual transacted value of the house, house features, household socioeconomic characteristics, particulate matter pollution (PM10) concentrations, and rainfall. Our results indicate that the average household needs to be compensated by approximately US$ 1007.54 per year to tolerate a 1 µg/m3 increase in PM10. Our estimates are on the higher end of previous studies. If estimates under-represent the value of clean air, then this discourages government policy aimed at mitigating pollution, with all its health and quality of life implications.

Suggested Citation

  • Matías Fontenla & M. Ben Goodwin & Fidel Gonzalez, 2019. "Pollution and the choice of where to work and live within Mexico City," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-17, December.
    • Handle: RePEc:spr:laecrv:v:28:y:2019:i:1:d:10.1186_s40503-019-0072-6
    DOI: 10.1186/s40503-019-0072-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40503-019-0072-6
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40503-019-0072-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jeffrey E. Zabel & Katherine A. Kiel, 2000. "Estimating the Demand for Air Quality in Four U.S. Cities," Land Economics, University of Wisconsin Press, vol. 76(2), pages 174-194.
    2. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    3. Zabel, Jeffrey E., 2004. "The demand for housing services," Journal of Housing Economics, Elsevier, vol. 13(1), pages 16-35, March.
    4. Luc Anselin & Julie Le Gallo, 2006. "Interpolation of air quality measures in hedonic house price models : spatial aspects," Post-Print hal-00485017, HAL.
    5. Massimo Filippini & Adán L. Martínez-Cruz, 2016. "Impact of environmental and social attitudes, and family concerns on willingness to pay for improved air quality: a contingent valuation application in Mexico City," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 25(1), pages 1-18, December.
    6. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
    7. Berger, Mark C. & Blomquist, Glenn C. & Sabirianova Peter, Klara, 2008. "Compensating differentials in emerging labor and housing markets: Estimates of quality of life in Russian cities," Journal of Urban Economics, Elsevier, vol. 63(1), pages 25-55, January.
    8. Xuan Huang & Bruno Lanz, 2018. "The Value of Air Quality in Chinese Cities: Evidence from Labor and Property Market Outcomes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(4), pages 849-874, December.
    9. Lavín, Felipe Vásquez & Dresdner, Jorge & Aguilar, Renato, 2011. "The value of air quality and crime in Chile: a hedonic wage approach," Environment and Development Economics, Cambridge University Press, vol. 16(3), pages 329-355, June.
    10. Germán M. Izón & Michael S. Hand & Matias Fontenla & Robert P. Berrens, 2010. "The Economic Value Of Protecting Inventoried Roadless Areas: A Spatial Hedonic Price Study In New Mexico," Contemporary Economic Policy, Western Economic Association International, vol. 28(4), pages 537-553, October.
    11. Palmquist, Raymond B., 1982. "Measuring environmental effects on property values without hedonic regressions," Journal of Urban Economics, Elsevier, vol. 11(3), pages 333-347, May.
    12. Fontenla, Matas & Gonzalez, Fidel, 2009. "Housing demand in Mexico," Journal of Housing Economics, Elsevier, vol. 18(1), pages 1-12, March.
    13. Gonzalez, Fidel & Leipnik, Mark & Mazumder, Diya, 2013. "How much are urban residents in Mexico willing to pay for cleaner air?," Environment and Development Economics, Cambridge University Press, vol. 18(3), pages 354-379, June.
    14. Chakraborti, Lopamudra & Heres, David & Hernandez, Danae, 2019. "Are land values related to ambient air pollution levels? Hedonic evidence from Mexico City," Environment and Development Economics, Cambridge University Press, vol. 24(3), pages 252-270, June.
    15. Mingche M. Li & H. James Brown, 1980. "Micro-Neighborhood Externalities and Hedonic Housing Prices," Land Economics, University of Wisconsin Press, vol. 56(2), pages 125-141.
    16. Smith, V Kerry & Huang, Ju-Chin, 1995. "Can Markets Value Air Quality? A Meta-analysis of Hedonic Property Value Models," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 209-227, February.
    17. Carriazo, Fernando & Gomez-Mahecha, John Alexander, 2018. "The demand for air quality: evidence from the housing market in Bogotá, Colombia," Environment and Development Economics, Cambridge University Press, vol. 23(2), pages 121-138, April.
    18. José Rodríguez-Sánchez, 2014. "Do Mexicans care about air pollution?," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 23(1), pages 1-24, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Caballero, María Victoria & Martínez-García, María Pilar & Morales, José R., 2024. "Pollution-induced migration and environmental policy in an economic geography model," Resource and Energy Economics, Elsevier, vol. 76(C).
    2. Bahlali, Mohamed & Petit, Quentin, 2024. "An equilibrium model of city with atmospheric pollution dispersion," Journal of Mathematical Economics, Elsevier, vol. 111(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gonzalez, Fidel & Leipnik, Mark & Mazumder, Diya, 2013. "How much are urban residents in Mexico willing to pay for cleaner air?," Environment and Development Economics, Cambridge University Press, vol. 18(3), pages 354-379, June.
    2. Katherine Kiel, 2006. "Environmental Contamination and House Values," Working Papers 0601, College of the Holy Cross, Department of Economics.
    3. Hector M. Nuñez & Dusan Paredes & Rafael Garduño-Rivera, 2017. "Is crime in Mexico a disamenity? Evidence from a hedonic valuation approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 59(1), pages 171-187, July.
    4. Ramesh Chandra Das & Tonmoy Chatterjee & Enrico Ivaldi, 2022. "Nexus between Housing Price and Magnitude of Pollution: Evidence from the Panel of Some High- and-Low Polluting Cities of the World," Sustainability, MDPI, vol. 14(15), pages 1-18, July.
    5. Yusuf, Arief Anshory & Resosudarmo, Budy P., 2009. "Does clean air matter in developing countries' megacities? A hedonic price analysis of the Jakarta housing market, Indonesia," Ecological Economics, Elsevier, vol. 68(5), pages 1398-1407, March.
    6. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 405-465, Elsevier.
    7. Arief Anshory Yusuf & Budy P. Resosudarmo, 2006. "Assessing the Value of Clean Air in a Developing Country: A Hedonic Price Analysis of the Jakarta Housing Market, Indonesia," Economics and Environment Network Working Papers 0601, Australian National University, Economics and Environment Network.
    8. Nicolai V. Kuminoff & V. Kerry Smith & Christopher Timmins, 2010. "The New Economics of Equilibrium Sorting and its Transformational Role for Policy Evaluation," NBER Working Papers 16349, National Bureau of Economic Research, Inc.
    9. Chakraborti, Lopamudra & Heres, David & Hernandez, Danae, 2019. "Are land values related to ambient air pollution levels? Hedonic evidence from Mexico City," Environment and Development Economics, Cambridge University Press, vol. 24(3), pages 252-270, June.
    10. Runqiu Liu & Chao Yu & Canmian Liu & Jian Jiang & Jing Xu, 2018. "Impacts of Haze on Housing Prices: An Empirical Analysis Based on Data from Chengdu (China)," IJERPH, MDPI, vol. 15(6), pages 1-21, June.
    11. Koen van Ruijven & Joep Tijm, 2022. "Do people value environmental goods? Evidence from the Netherlands," CPB Discussion Paper 438, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Susana Ferreira & Mirko Moro, 2013. "Income and Preferences for the Environment: Evidence from Subjective Well-Being Data," Environment and Planning A, , vol. 45(3), pages 650-667, March.
    13. Dan S. Rickman, 2014. "Assessing Regional Quality of Life: A Call for Action in Regional Science," The Review of Regional Studies, Southern Regional Science Association, vol. 44(1), pages 1-12, Spring.
    14. Kiel, Katherine A. & Zabel, Jeffrey E., 2008. "Location, location, location: The 3L Approach to house price determination," Journal of Housing Economics, Elsevier, vol. 17(2), pages 175-190, June.
    15. Ioulia Ossokina & Gerard Verweij, 2011. "Quasi-experimental evidence on the effect of traffic externalities on housing prices," ERSA conference papers ersa11p606, European Regional Science Association.
    16. Fernando Carriazo & John Alexander Gomez, 2015. "The Demand for Air Quality: A Case study in Bogotá, Colombia," Documentos CEDE 14071, Universidad de los Andes, Facultad de Economía, CEDE.
    17. Beckmann, Michael & Cornelissen, Thomas & Schauenberg, Bernd, 2009. "Fixed-term Employment, Work Organization and Job Satisfaction : Evidence from German Individual-Level Data," Working papers 2009/08, Faculty of Business and Economics - University of Basel.
    18. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2010. "The Life Satisfaction Approach to Environmental Valuation," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 139-160, October.
    19. Douglas J. Krupka & Kwame N. Donaldson, 2013. "Wages, Rents, And Heterogeneous Moving Costs," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 844-864, January.
    20. Wang, Jianing & Lee, Chyi Lin, 2022. "The value of air quality in housing markets: A comparative study of housing sale and rental markets in China," Energy Policy, Elsevier, vol. 160(C).

    More about this item

    Keywords

    Particulate matter (PM10); Valuation of air quality; Wage-hedonic models; Residential sorting; Compensating differential; Marginal willingness to pay; Mexico; Latin America;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:laecrv:v:28:y:2019:i:1:d:10.1186_s40503-019-0072-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.