Methods Development for Assessing Air Pollution Control Benefits Volume II, Experiments in Valuing Non-market Goods: A Case Study of Alternative Benefit Measures of Air Pollution Control in the South Coast Air Basin of Southern California

In this study, the empirical results obtained from two experiments to measure the health and aesthetic benefits of air pollution control in the South Coast Air Basin of southern California are reported. Each experiment involved the same six neighborhood pairs, where the pairings were made on the basis of similarities in housing characteristics, socioeconomic factors, distances to beaches and services, average temperatures, and subjective indicators of housing quality. The elements of each pair differed substantially only in terms of air quality. Data on actual market transactions, as registered in single-family residential property transactions, and on stated preferences for air quality, as revealed in neighborhood surveys, were collected. It was expected that a relation would exist between what people do pay for air quality as reflected in property value differences, and what they say they will pay, provided there are no incentives for them to distort their bids. Given various assumptions on income, location, aggregation by areas, specific housing characteristics, and knowledge of the health effects of air pollution, both the survey and the property value experiments yielded estimates of willingness-to-pay in early 1978 dollars for an improvement from “poor” to “fair” air quality of from $20 to $150 per month per household. The results, therefore, indicate that air quality deterioration in the Los Angeles area has had substantial negative effects on housing prices and that these effects are comparable in magnitude to what people say they are willing to pay for improved air quality.