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We develop a framework to estimate willingness to pay for clean air from defensive investments on differentiated products. Applying this framework to scanner data on air purifier sales in China, we find that a household is willing to pay $1.34 annually to remove 1 μg/m3 of air pollution (PM10) and $32.7 annually to eliminate the pollution induced by the Huai River heating policy. Substantial heterogeneity is explained by income and exposure to information on air pollution. Using these estimates, we evaluate various environmental policies and quantify the value of recent air quality improvements since China declared a war on pollution in 2014.
Shuang Zhang is an Associate Professor of Economics at Imperial College Business School. Her research interests are in environmental and energy economics, climate change, and gender inequality. She received a PhD from Cornell University. Prior to joining Imperial College, she was a SIEPR Postdoctoral Fellow at Stanford University and an Associate Professor at University of Colorado Boulder.