Academic journal article Contemporary Economic Policy

Information and the Demand for Clean Air

Academic journal article Contemporary Economic Policy

Information and the Demand for Clean Air

Article excerpt


The idea that household location decisions are influenced by neighborhood characteristics is well established empirically. A number of studies have identified local air quality as a specific neighborhood-level determinant (Bayer. Keohane, and Timmins 2009;. Finney, Goetzke. and Yoon 2011; Kahn 2000; Zabel and Kiel 2000). The findings on air quality suggest that households are able to access and react to information on the environmental good in making location decisions. The average effects air quality has on location, however, may mask substantial variation in response to the amenity across households, many of which may not recognize the good at all.

This paper examines the relationship between the household's sensitivity to local environmental quality and its exposure to information on the environment. Households may acquire information on the environment from multiple sources, including personal experience (e.g.. visual observation of smog), informal communication with neighbors, and government pronouncements. A large part of the primary data on air quality in the United States comes from air monitoring stations operated by state governments and the Environmental Protection Agency (EPA). This study estimates the location determinants of a sample of households relocating within California, a state with long-established public information programs on environmental quality.

In California, air quality .alerts have served as an important medium conveying information on environmental quality to state residents. The alerts. which normally include information on the possible health effects of poor air quality, occur primarily in urban areas, whose air pollution levels are normally higher than in nonurban areas. Exposure to the alerts could increase household sensitivity to the environment in making location decisions. This study finds evidence of this effect for the sample of California households.


The primary tool local governments use to relay information on the environment is the Air Quality Index (AQI), a measure developed by the EPA. The index ranges from 0 to 500, where under 100 is considered good-to-moderate air quality; 100 to 150 is determined by the EPA unhealthy at least for sensitive groups; and a score over 150 is considered generally unhealthy and comes with an EPA recommendation that those with respiratory .ailments avoid prolonged outdoor exposure and everyone else limit exposure. The EPA previously used the Pollution Standard Index (PSI), replacing it with the AQI in 2000. The two indices are closely related., the AQI modifies the standard used in the PSI for particulate matter and ozone, two of the five pollutants that make up the indices. Ground-level ozone, formed from a chemical reaction of pollutants in the lower atmosphere, is a significant environmental problem specifically in urban areas (1) Exposure to high ozone levels affects lung function; its immediate effects are more serious for those with respiratory diseases, such as asthma.

California is one of the few states whose air quality standards are more stringent than federal standards under the Clean Air Act. The state grades the air of every county, determining yearly each county's compliance with state standards for various pollutants. The state's current ozone thresholds are an 8-h average of 0.070 parts per million (ppm), and a 1-h mean of 0.090 ppm; the EPA's current ozone standard is an 8-h average of 0.075 ppm. Yearly, the majority of counties fail state standards; the attainment counties in the state are mainly in nonurban areas. (2) Polluting facilities in non-attainment areas are subject to increased state regulation.

The state assigns 35 local governments the task of controlling local air pollution. (3) The districts are the primary source of official state information on local environmental quality, including the dissemination of air quality alerts. …

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