The demand for air quality: evidence from the housing market in Bogotá, Colombia

Abstract

Identifying a demand function for air quality is a key input to calculate welfare measurements of pollution abatement policies. We defined intra-urban housing submarkets to apply a Second Stage hedonic pricing model that allowed us to identify an inverse demand function for PM10 reductions in Bogotá. The monthly benefits of compliance with the U.S. Environmental Protection Agency standard (50 μg/m3 – annual average), and the far more stringent World Health Organization standard (20 μg/m3 – annual average) are valued at US$12.16 and US$189.64 per household, respectively. These values, in turn, represent about 1.35 per cent and 21.04 per cent of the average household income. The hedonic model applied hereby shows that intra-urban housing submarkets are suitable for the identification of a demand function to be used by policy makers interested in evaluating non-marginal benefits (costs) from air quality improvements (deterioration).

Impacts of Haze on Housing Prices: An Empirical Analysis Based on Data from Chengdu (China)

“…Ligus [ 18 ] attempted to estimate how much Polish citizens would be willing to pay for clean air by applying the Contingent Valuation Method (CVM). Carriazo et al [ 19 ] applied a Second Stage Hedonic Pricing Model by defining intra-urban housing sub-markets. They discovered a negative relationship between PM 10 concentration and rental prices, which predicted that an increase of 1 µg/m 3 is accompanied by a monthly average rent reduction of 0.61 percent for apartments, of 2.43 percent for condominiums, and of 2.17 percent for houses.…”

How does air pollution affect housing rental prices in Chile? An economic assessment of PM2.5 concentration across Chilean communes

“…In what follows, we present the main characteristics of the hedonic model following Freeman et al . (2014) and Carriazo and Gomez-Mahecha (2018). Under this model, a household's utility function may be represented as , where x is a composite good and is a vector of the characteristics that affect housing rental price, such as housing, neighborhood, and commune attributes (including PM 2.5 concentration).…”

“…(2019) and Chakraborti et al . (2019), as well as one study for Bogota, Colombia, performed by Carriazo and Gomez-Mahecha (2018). For Chile, there are only a few hedonic studies dating from the 1990s and the first decade of the 2000s and, as in México and Colombia, these mainly focus on specific Chilean communes, such as Santiago (Rogat et al ., 1996), Concepcion, and Talcahuano (Mardones, 2006).…”

Nature-Based Solutions in Latin American Cities

“…However, it has been argued that NbS should be considered as opportunities for investments instead of additional administrative costs (Maes and Jacobs 2015). For instance, UF in Bogotá is articulated or framed in terms of the benefits urban trees provide to improve air quality (Carriazo and Gomez-Mahecha 2018). In the case of Lima, according to Gammie and De Bievre (2014) restoration interventions in water runoff management structures posed a costbenefit advantage over gray infrastructure of an estimated USD 85.75 per m 3 /s of water runoff.…”

“…Moreover, lack of security within urban forests and parks is a welldocumented issue for cities in the northern hemisphere, and in Lima and Bogotá these are perceived as areas with increasing criminality. Carriazo and Gomez-Mahecha (2018) and Tovar (2013) considered that one of the ecosystems disservices of UF is the use of parks for criminal activities. Therefore, it is important to consider the location of the area, and rather than UF increasing insecurity, it should be rephrased as poorly maintained UF increases criminality in either neglected or poor suburbs.…”