1. Defensive investments and the demand for air quality: Evidence from the NOx budget program
- Author
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Deschênes, O, Greenstone, M, and Shapiro, JS
- Subjects
D1 ,H4 ,I1 ,Q4 ,Q5 ,pharmaceuticals ,ozone ,cap and trade ,willingness to pay for air quality ,mortality ,compensatory behavior ,human health ,Economics ,Commerce ,Management ,Tourism and Services - Abstract
The demand for air quality depends on health impacts and defensive investments, but little research assesses the empirical importance of defenses. A rich quasi-experiment suggests that the Nitrogen Oxides (NOx) Budget Program (NBP), a cap-and-trade market, decreased NOx emissions, ambient ozone concentrations, pharmaceutical expenditures, and mortality rates. The annual reductions in pharmaceutical purchases, a key defensive investment, and mortality are valued at about $800 million and $1.3 billion, respectively, suggesting that defenses are over one-third of willingness-to-pay for reductions in NOx emissions. Further, estimates indicate that the NBP's benefits easily exceed its costs and that NOx reductions have substantial benefits.
- Published
- 2017