The Role of Locational Equilibria and Collective Behavior in Measuringthe Benefits of Air Pollution Policies

EPA Grant Number: R826609 aka R828103
Title: The Role of Locational Equilibria and Collective Behavior in Measuringthe Benefits of Air Pollution Policies
Investigators: Smith, V. Kerry , Sieg, Holger
Institution: Duke University
Current Institution: North Carolina State University , Duke University
EPA Project Officer: Chung, Serena
Project Period: September 1, 1998 through August 31, 2001
Project Amount: $199,948
RFA: Decision-Making and Valuation for Environmental Policy (1998) RFA Text |  Recipients Lists
Research Category: Environmental Justice


This research proposes to use the spatial equilibrium in estimating the economic value of reductions in air pollution. This equilibrium includes recognition of households' choices of residential locations based on site characteristics, including environmental amenities, as well as the collective choice process determining the amount of community provided local public goods. This spatial equilibrium estimator (SEE) allows estimates of benefits from air pollution policy to take account of general equilibrium adjustments in response to policy, and permits a behaviorally consistent description of a policy's distributional consequences (including environmental justice and racism). The research has three objectives: (1) to extend the SEE framework to include environmental public goods and to allow for a more detailed characterization of the observable sources of heterogeneity in household preferences; (2) to apply the SEE framework along with conventional hedonic property value and simple (i.e., mulitnominal logit) RUM frameworks using current data for air quality (primarily ozone, nitrogen oxide, and particulate matter), housing prices and characteristics as well as community characteristics, in the Los Angeles area; (3) to compare the benefit estimates implied by each framework for a set of current policy alternatives and their respective sensitivities to their maintained hypotheses.


To meet the objectives we will construct a data set for a set of counties in California that combines complete information on residential property values with the Air Resources Board and EPA ambient air quality data as well as information about local schools and neighborhood characteristics from census statistics. The geographic resolution of the housing information includes longitude and latitude as well as other identifiers to permit the merge. Maximum likelihood and simulation estimators will be applied to the sample at different levels of spatial and temporal resolution. The comparison of results will focus on the estimates of marginal willingness to pay.

Expected Results:

The research should: (a) evaluate the importance of local public goods for the measurement of the benefits of reducing air pollution; (b) compare the SEE with the simpler revealed preference hedonic and RUM approaches; and (c) provide new estimates of the incremental benefits for reducing air pollution in Southern California that can serve as plausibility checks for EPA's effects - specific measures.

Improvement in Risk Assessment or Risk Management: EPA's current benefit practices monetize the economic values derived from each specific risk reduction. As a result, each effect is treated as independent (for valuation), and their sum can be a larger amount than an individual would be willing to pay for the composite of the risk changes as a group. Benefit measures based on locational adjustments provide a plausibility check for the effect-specific measures.

Publications and Presentations:

Publications have been submitted on this project: View all 5 publications for this project

Journal Articles:

Journal Articles have been submitted on this project: View all 3 journal articles for this project

Supplemental Keywords:

Air Pollution Benefits, Benefit Transfer Practices, RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Air, Geographic Area, particulate matter, State, Economics, decision-making, tropospheric ozone, Ecology and Ecosystems, Economics & Decision Making, air pollution policy, ecosystem valuation, locational equilibria, benefits transfer, community involvement, collaborative resolution, collective choice process, decision making, air quality benefit estimates, measuring benefits, economic incentives, environmental values, house prices, willingness to pay, California (CA)

Relevant Websites:

For additional research on this topic please see grant #R828103

Progress and Final Reports:

  • 1999 Progress Report
  • 2000
  • Final