Pollution exposure and willingness to pay for clean air in urban China

Abstract

Rapid industrialization and urbanization are often accompanied by deteriorating air quality that imposes substantial health and productivity costs on the local population. However, existing studies have generally found low marginal willingness to pay (WTP) for mitigating such damages. To understand the determinants and the extent of WTP for air quality improvements, we collected comprehensive socio-demographic and stated preference information from more than 3000 random respondents in three cities in China. Combining the survey data with air quality data from ground-level monitoring stations, we find that exposure to persistent air pollution is a significant determinant of the extent individuals are willing to pay for cleaner air. On average, urban residents are willing to pay 65 CNY (~10 USD) each year to improve air quality to World Health Organization standards. Males and individuals that are younger and more educated tend to have higher WTP. We also find that individuals with more knowledge of sustainability and who engage in more pro-environmental behaviors are willing to pay more. Compared to existing government monetary incentives to reduce air pollution, the public's total WTP for cleaner air is much higher. Overall, these results highlight the potential welfare gain for policymakers to implement more stringent air quality regulations to reduce pollution.