Skip to main content
    • Aa
    • Aa

How much are urban residents in Mexico willing to pay for cleaner air?

  • Fidel Gonzalez (a1), Mark Leipnik (a2) and Diya Mazumder (a3)

We estimate the marginal willingness-to-pay for PM10 abatement in the three largest Mexican cities. We use a unique data set with actual market transactions at the household level from January 2003 to May 2004 and observed PM10 concentrations. We follow an instrumental variable approach to mitigate bias from omitted variables. We exploit the seasonality in PM10 concentrations due to rainfall patterns in those cities to construct a valid instrument for PM10. We find the house price–pollution elasticity to be around − 0.07 for Mexico City, − 0.05 for Guadalajara, and − 0.07 for Monterrey, implying that one unit reduction in PM10 levels is valued at US$41.73, 36.34 and 43.47, respectively. Our results indicate that urban residents of Mexico are willing to pay for cleaner air.

Hide All
L. Anselin and J. Gallo (2006), ‘Interpolation of air quality measures in hedonic house price models: spatial aspects’, Spatial Economic Analysis 1(1): 17421780.

T. Bartik (1987), ‘The estimation of demand parameters in hedonic price models’, Journal of Political Economy 95(1): 8188.

J.N. Brown and H.S. Rosen (1982), ‘On the estimation of structural hedonic price models’, Econometrica 50(3): 765768.

E. Cassel and R. Mendelsohn (1985), ‘The choice of functional forms for hedonic price equations: comment’, Journal of Urban Economics 18(2): 135142.

K.Y. Chay and M. Greenstone (2005), ‘Does air quality matter? Evidence from the housing market’, Journal of Political Economy 113(2): 376424.

M. Cropper , L. Deck , and K. McConnell (1988), ‘On the choice of functional form for hedonic price functions’, Review of Economics and Statistics 70(4): 668675.

R. Deacon , D. Brookshire , A. Fisher , (1998), ‘Research trends and opportunities in environmental and natural resource economics’, Environmental and Resource Economics 11(3–4): 383397.

R. Dunlap and R. York (2008), ‘The globalization of environmental concern and the limits of the postmaterialist values explanation: evidence from four multinational surveys’, Sociological Quarterly 49(3): 529563.

D. Epple (1987), ‘Hedonic prices and implicit markets: estimating demand and supply functions for differentiated products’, Journal of Political Economy 95(1): 5980.

P. Graves , J. Murdoch , M. Thayer , and D. Waldman (1988), ‘The robustness of hedonic price estimation: urban air quality’, Land Economics 64(3): 220233.

C. Kim , T. Phipps , and L. Anselin (2003), ‘Measuring the benefits of air quality improvement: a spatial hedonic approach’, Journal of Environmental Economics and Management 45(1): 2439.

M. Li and H. Brown (1980), ‘Micro-neighbourhood externalities and hedonic housing prices’, Land Economics 56(2): 125141.

V. Mugica , M. Maubert , M. Torres , J. Munoz , and E. Rico (2002), ‘Temporal and spatial variations of metal content in TSP and PM10 in Mexico City during 1996–1998’, Aerosol Science 33(1): 91102.

R. Palmquist (1982), ‘Measuring the environmental effects on property values without hedonic regressions’, Journal of Urban Economics 11(3): 333347.

X. Querol , J. Pey , M.C. Minguillon , (2008), ‘PM speciation and sources in Mexico during the MILAGRO-2006 Campaign’, Atmospheric Chemistry and Physics 8: 111128.

R. Ridker and J. Henning (1967), ‘The determinants of residential property values with special reference to air pollution’, Review of Economics and Statistics 49(2): 246257.

S. Rosen (1974), ‘Hedonic prices and implicit markets: product differentiation in pure competition’, Journal of Political Economy 82(1): 3455.

W. Ruijgrok and F. Römer (1993), ‘Aspects of wet, acidifying deposition in Arnhem: source regions, correlations, and trends’, Atmospheric Environment 27(A): 637653.

V. Smith and T. Deyak (1975), ‘Measuring the impact of air pollution on property values’, Journal of Regional Science 15(3): 277288.

V.K. Smith and J.C. Huang (1995), ‘Can markets value air quality? A meta-analysis of hedonic property value models’, Journal of Political Economy 103(1): 209227.

B. Valle-Hernandez , V. Mugica , E. Salinas , O. Amador , M. Murillo , R. Villalobos , and A. De Vizcaya (2010), ‘Temporal variation of nitro-polycyclic aromatic hydrocarbons in PM10 and PM2.5 collected in Northern Mexico City’, Science of the Total Environment 408: 54295438.

K. Wieand (1973), ‘Air pollution and property values: a study of the St. Louis area’, Journal of Regional Science 13(1): 9195.

A. Yusuf and B. Resosudarmo (2009), ‘Does clean air matter in developing countries’ megacities? A hedonic price analysis of the Jakarta housing market, Indonesia’, Ecological Economics 68(5): 13981407.

J. Zabel (2004), ‘The demand for housing services’, Journal of Housing Economics 13(1): 1635.

J. Zabel and K. Kiel (2000), ‘Estimating the demand for air quality in four U.S. cities’, Land Economics 76(2): 174194.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Environment and Development Economics
  • ISSN: 1355-770X
  • EISSN: 1469-4395
  • URL: /core/journals/environment-and-development-economics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 1
Total number of PDF views: 30 *
Loading metrics...

Abstract views

Total abstract views: 237 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 26th September 2017. This data will be updated every 24 hours.