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

Published online by Cambridge University Press:  08 January 2021

Katty Gómez Open the ORCID record for Katty Gómez [Opens in a new window]  and
Victor Iturra
Katty Gómez*
Affiliation:
Department of Economics-IDEAR, Universidad Católica del Norte, Antofagasta, Chile
Victor Iturra
Affiliation:
Department of Economics-IDEAR, Universidad Católica del Norte, Antofagasta, Chile
*
*Corresponding author. E-mail: [email protected]
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Abstract

This paper addresses a serious environmental concern in Chile: PM2.5 concentration, a health threat especially affecting the population living in the central and southern communes of Chile. Using housing data for 312 spatial units, along with interpolation techniques to predict air pollution for communes with missing information, we find that, on average, 1 μg/m3 increase in PM2.5 produces a decrease of 4.1 per cent in housing rental prices. These estimates also show an important upward bias in the estimated coefficient when the endogeneity of air pollution is not addressed. An average Chilean household would be willing to pay US$12.31 per month for a one-unit reduction in PM2.5 concentration. Similar monetary values have been found in previous studies for both México and Chile. As with PM2.5 concentration, the average marginal willingness to pay exhibits marked differences across communes. From these results, the study addresses some policy implications and proposes avenues for future research.

Keywords

air pollutionhedonic modelhousing rental pricewillingness to payChile

JEL classification

R21: Housing Demand Q51: Valuation of Environmental Effects Q53: Air Pollution • Water Pollution • Noise • Hazardous Waste • Solid Waste • Recycling
Type
Research Article
Information
Environment and Development Economics , Volume 26 , Issue 4 , August 2021 , pp. 364 - 380
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press

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