Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions
Willingness to pay for air quality is a function of health and the costly defensive investments that contribute to health, but there is little research assessing the empirical importance of defensive investments. The setting for this paper is a large US emissions cap and trade market – the NOx Budge...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
MIT CEEPR
2012
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| Online Access: | http://hdl.handle.net/1721.1/71998 |
| _version_ | 1826200385683980288 |
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| author | Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. |
| author_facet | Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. |
| author_sort | Deschênes, Olivier |
| collection | MIT |
| description | Willingness to pay for air quality is a function of health and the costly defensive investments that contribute to health, but there is little research assessing the empirical importance of defensive investments. The setting for this paper is a large US emissions cap and trade market – the NOx Budget Trading Program (NBP) – that has greatly reduced NOx emissions since its initiation in 2003. Using rich quasi-experimental variation, we find that the reductions in NOx emissions decreased the number of summer days with high ozone levels by about 25%. The NBP also led to reductions in expenditures on prescription pharmaceutical expenditures of about 1.9%. Additionally, the summer mortality rate declined by approximately 0.5%, indicating that there were about 2,200 fewer premature deaths per summer, mainly among individuals 75 and older. The monetized value of the reductions in pharmaceutical purchases and mortality rates are each roughly $900 million annually, suggesting that defensive investments are a significant portion of willingness to pay for air quality. Finally, we cautiously conclude that the reductions in ozone are the primary channel for these reductions in defensive investments and mortality rates, which indicates that willingness to pay for ozone reductions is larger than previously understood. |
| first_indexed | 2024-09-23T11:35:35Z |
| format | Working Paper |
| id | mit-1721.1/71998 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:35:35Z |
| publishDate | 2012 |
| publisher | MIT CEEPR |
| record_format | dspace |
| spelling | mit-1721.1/719982019-04-12T21:04:02Z Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. Willingness to pay for air quality is a function of health and the costly defensive investments that contribute to health, but there is little research assessing the empirical importance of defensive investments. The setting for this paper is a large US emissions cap and trade market – the NOx Budget Trading Program (NBP) – that has greatly reduced NOx emissions since its initiation in 2003. Using rich quasi-experimental variation, we find that the reductions in NOx emissions decreased the number of summer days with high ozone levels by about 25%. The NBP also led to reductions in expenditures on prescription pharmaceutical expenditures of about 1.9%. Additionally, the summer mortality rate declined by approximately 0.5%, indicating that there were about 2,200 fewer premature deaths per summer, mainly among individuals 75 and older. The monetized value of the reductions in pharmaceutical purchases and mortality rates are each roughly $900 million annually, suggesting that defensive investments are a significant portion of willingness to pay for air quality. Finally, we cautiously conclude that the reductions in ozone are the primary channel for these reductions in defensive investments and mortality rates, which indicates that willingness to pay for ozone reductions is larger than previously understood. 2012-08-06T20:33:43Z 2012-08-06T20:33:43Z 2012-07 Working Paper http://hdl.handle.net/1721.1/71998 CEEPR-WP-2012-007 en_US CEEPR Working Papers;2012-007 An error occurred on the license name. An error occurred getting the license - uri. application/pdf MIT CEEPR |
| spellingShingle | Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_full | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_fullStr | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_full_unstemmed | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_short | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_sort | defensive investments and the demand for air quality evidence from the nox budget program and ozone reductions |
| url | http://hdl.handle.net/1721.1/71998 |
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