Measuring the welfare cost of air pollution in Shanghai: evidence from the housing market

The purpose of this study is to quantify the marginal willingness to pay (MWTP) for clean air in China. We provide the first estimate of MWTP for clean air by implementing a hedonic method using housing price and air quality data from Shanghai. Our estimates imply that air pollution has a significant and negative impact on housing price. We also find that the willingness to pay for better air quality varies significantly across different income groups. This paper helps to deepen our understanding of the economic impacts of air pollution in emerging Asian metropolises where residents are suffering from the most severe respiratory health problems.