Can clean air make you happy? Examining the effect of nitrogen dioxide (NO2) on life satisfaction

In order to estimate the welfare effects of exposure to nitrogen dioxide (NO2), we combine life satsifaction data from the British Household Panel Survey (BHPS) and UK Household Longitudinal Survey (UKHLS) with detailed air quality records held by the UK Department for Environment, Food and Rural Affairs (DEFRA). To address endogeneity concerns, we linked these with a variety of georeferenced datasets capturing differences in economic, social and environmental conditions across neighbourhoods. We also took advantage of the panel nature of our data by employing individual fixed effects. Our results suggest a significant and negative association between mean annual ambient NO2 and life satisfaction, and moreover that these effects are substantive and comparable to that of many ’big hitting’ life events.