Valuation of Air Quality in Chile: The Life Satisfaction Approach

Abstract

Chile is one of the worst countries in Latin America in terms of urban air pollution. This situation negatively affects the health and well-being of Chileans. This paper uses a non-traditional valuation method, based on life satisfaction perception, to estimate citizens’ willingness to pay (WTP) for the reduction of air pollution in Chilean cities. We consider the annual average of PM10 and PM2.5 for 70 municipalities, including the main urban areas. An objective measure of air pollution is linked to a subjective measure of life satisfaction by using the main survey of households in Chile for cross-sectional socioeconomic data. According to our knowledge, this is the first study of its kind in Latin American and, in the case of PM2.5 reductions, one of the first cases at the world level. We found that our estimation of WTP for reducing PM10 and PM2.5 emissions are significantly lower in Chilean cities than in most of the results found in the literature in other countries. However, when comparing this paper results to the ones from other Chilean studies, perspectives vary, e.g., our estimation of WTP for reducing MP10 is higher than one obtained when using the damage function approach but comparable to another obtained with the hedonic prices approach.