Estimating the cost of air pollution in South East Queensland: An application of the life satisfaction non-market valuation approach

Making use of data from the Household, Income and Labour Dynamics in Australia (HILDA) survey coupled with air pollution data generated by The Air Pollution Model (TAPM), this paper employs the life satisfaction approach to estimate the cost of air pollution from human activities in South East Queensland. This paper offers at least three improvements over much of the existing literature: (1) within(as opposed to cross-) country variations in air pollution are considered; (2) very high resolution air pollution data is employed; and (3) weather variables are included as controls within the life satisfaction function. A negative relationship is found between life satisfaction and the number of days ambient concentrations of PM10 exceed health guidelines. This yields an implicit willingness-to-pay, in terms of annual household income, for pollution reduction of approximately AUD 6,000. This result is robust to a number of model specifications and controls.