Valuing Air Pollution in Britain

This study explores the relationship between happiness and air pollution in Britain using data from the British Household Panel Survey (BHPS). The effects of air pollution on individuals’ happiness are estimated and their monetary value is calculated. In particular, three air pollutants are examined in this paper; the sulphur dioxide (SO2), the ground-level ozone (O3) and the nitrogen dioxides (NOX). Moreover, two different approaches are followed. The first approach refers to panel fixed and random effects regressions. The second model considers fixed effects with lagged dependent variable. The results show that the SO2 presents the strongest negative effects on well-being happiness followed by O3 and NOX. However, ozone’s and nitrogen oxides’ monetary costs are very low in comparison with sulphur dioxide.The monetary values for sulphur dioxide range between £12-£18, while the respective values for ground level ozone and nitrogen oxides range between £3-£6 and £2 respectively. JEL: C23, Q51, Q53