Evaluating the short-term cost of low-level local air pollution: a life satisfaction approach
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To estimate the impact of air pollution on well-being, we combine a set of repeated cross-sectional surveys of individuals with high-resolution pollution and weather data. The respondents’ level of life satisfaction is modeled as a function of their socioeconomic characteristics and income as well as the weather and air pollution on the day of the survey interview. To overcome endogeneity problems, we include a set of high-resolution geographic fixed effects. Our analysis suggests that even after controlling for seasonal and local fixed effects, higher air pollution significantly reduces life satisfaction. The adverse effect of transient increases in air pollution is greater on individuals with poor health status. Estimating the average compensating differential between income and air pollution shows that the value of improving air quality by one-half standard deviation throughout the year is about 4.4 % of the average annual income of Canadians.