ABSTRACT
Expressing the benefits of reduced urban air pollution concentrations in monetary terms is a difficult task, despite the fact that the general nature of the benefits is reasonably well established. 2 Several attempts have been made to utilize economic analysis to estimate the dollar benefits of air quality improvements. One approach is to proxy willingness to pay by measuring either the added cost to society from increased air pollution, or equivalently the reduced costs associated with air quality improvement." A second technique infers willing-
ness to pay for better air quality from an analysis of the housing market, on the presumption that individuals will pay more for a unit located in an area with good air quality than for an otherwise identical unit located in an area with poor air quality.•
This paper investigates the methodological problems associated with the housing market approach. While several studies have used this methodology to estimate the demand for air quality improvements, they have paid little attention to the sensitivity of the results to the assumptions embedded in the procedures.• Using data for the Boston housing market, we generate quantitative estimates of the willingness to pay for air quality improvements and test the sensitivity of these results to alternative specifications of the basic building blocks in the procedure. Our data base is superior to others because it contains a large number of neighborhood variables (necessary to isolate the independent influence of air pollution) and more reliable air pollution data.
