The Economics of Environmental Vulnerability: Epidemiology, Household Status, and Air PollutionEPA Grant Number: R831595
Title: The Economics of Environmental Vulnerability: Epidemiology, Household Status, and Air Pollution
Investigators: Smith, V. Kerry , Evans, Mary F. , Poulos, Christine
Institution: North Carolina State University , Desert Research Institute , University of Tennessee
EPA Project Officer: Hahn, Intaek
Project Period: October 1, 2004 through September 30, 2007
Project Amount: $399,549
RFA: Valuation for Environmental Policy (2003) RFA Text | Recipients Lists
Research Category: Environmental Justice
Analyses of U.S. air quality regulations identify subpopulations that are particularly sensitive to the adverse health effects associated with air pollution on the basis of epidemiological studies of the physiological effects of pollution (EPA, ). We argue that the observed susceptibility of children and older adults to environmental degradation stems from not one but two important factors: physiological sensitivity and economic vulnerability.
This proposed research provides the first consistent economic basis for defining environmentally vulnerable populations in two dimensions: physiological sensitivity to environmental pollutants and limited economic capacity to engage in behaviors that avert or mitigate the effects of those pollutants. Smith et al.  demonstrate a framework that extends Feenberg and Mills’  concept of weak substitution and combines it with separability restrictions to permit a systematic treatment of the economic and physiological factors influencing susceptibility to environmental health risks. Separability allows the decomposition of a household’s expenditures into separate components that reveal income and substitution effects. Weak substitution provides the structure needed to describe the role of goods that are mitigating substitutes for pollutants. Our framework is general and offers a menu of separability restrictions that, when combined with weak substitution, achieve the same generic results but accommodate a wide range of problems. Our model encompasses separability attributed to household composition and decision scales (e.g. the collective model of the household, Chiappori [1988, 1992]) as well as joint modeling of physical effects (e.g. mortality and morbidity).
This research proposes to: (a) develop a unified theory of environmental vulnerability, integrating economic and physiological determinants and nesting past models of averting and mitigating behavior and costs within that framework; and (b) test the plausibility of the framework using two groups with known sensitivities to air pollution: children and older adults. Both applications will augment revealed preference (RP) studies using large nationwide databases with small focused stated preference (SP) studies.
One important implication of the conceptual framework is a description of the conditions that permit measurement of the conditional compensating variation due to environmental quality improvements using changes in vulnerable groups’ mitigating expenditures. The joint empirical estimation of RP and SP data will yield robust, generalizable results. The theoretical, methodological, and empirical results will be applicable in a broad range of environmental conditions and settings.