Piero Basaglia

Clearing the air: a spatial and temporal analysis of optimal air pollution reduction

Abstract

Estimating the economic benefits associated with marginal pollution removal is a crucial prerequisite to assessing the optimal stringency of environmental policies accurately. This study quantifies the causal effects of air pollutants on (i) defensive expenditures and (ii) economic productivity to retrieve empirical estimates of the social willingness to pay for air quality improvements that account for heterogeneity in local-scale benefits and dynamic variations in individuals’ defensive behavior. I additionally rely on textual analysis of newspaper articles to show that exposure to information plays a pivotal role in shaping the evolution of defensive behavior over time. To address concerns of spurious correlation, atmospheric temperature inversions are exploited as a source of exogenous dynamic variation in the spatial concentration of pollutants across England. The findings of this study carry important policy implications for ongoing discussions on environmental and climate regulation by providing evidence that more stringent policies fostering air quality improvements may be warranted from a social welfare perspective and could contribute to tackling existing health inequalities linked to pollution exposure.