Heterogeneity in Perceptions of Noise and Air Pollution: A Spatial Quantile Approach on the City of Madrid

Abstract

In this paper, we apply a hedonic housing price model to estimate the willingness to pay for less air pollution and noise in the city of Madrid. Using subjective data on the perception of air pollution and noise by the Madrid residents, we apply a quantile conditionally parametric model that allows one to quantify the heterogeneity of this willingness to pay values across quantiles of the conditional distributions of housing prices and their spatial heterogeneity across the whole study area. The results show that implicit prices for clean and quiet environment differ substantially across the housing markets, depending on the perceived intensity of pollution, accessibility to jobs and leisure, and some socioeconomic characteristics of the population. In particular, in some areas, households seem to make a trade-off between improvements in communication and some worsening in environmental conditions.