An Economic Analysis of Air Pollution and Health: The Case of St. Louis

Abstract

A health-oriented choice model is developed in which individuals are viewed as producers of health and good health is desired for both consumption and investment purposes. Individuals are able to adjust their consumption of medical care in order to defend against reductions in air quality. A compensating variation type marginal willingness to pay expression is derived for improved air quality and the model is tested using cross-sectional data on employed adult residents of St. Louis, Missouri. Estimates of marginal willingness to pay for the average employed person are derived for a 30% reduction in ozone. These values range from $18.45 to $24.48 per year.