Estimating the demand for air quality: New evidence based on the Chicago housing market

This paper combines a new, large household-level data set with the two-stage hedonic-estimation technique to derive new estimates of willingness to pay (WTP) for reduced air pollution. The WTP estimates are found robust against functional-form specification. Marginal WTP estimates for a reduction in particulate matter (PM-IO) are found to be quite comparable with some previous estimates. Benefits of nonmarginal changes exhibit consistently higher monetary returns in the case of PM-10 than in the ease of SO2, signifying that households dislike particulate pollution more than they do sulfur. (JEL Q25).