Preferences for air quality improvement in China: Evidence from discrete choice experiments

Abstract

Outdoor air pollution is one of the most detrimental issues to human health, and has triggered massive concern in many cities globally. Due to the public nature of the good, negative externalities caused by air pollution from industrial and individual activities cannot be solved by the market, and the central government has to step in to reduce air pollution. However, governments in developing countries are not always fully incentivised to combat pollution due to concern about reduced economic growth, and governmental action depends on the trade-off between air quality and economic development. To inform this trade-off decision, estimates for both the benefits of air quality improvement and the costs of air quality deterioration are required.
This thesis aims to elicit individuals’ preferences for air quality changes using discrete choice experiments. The study area is Beijing, China, where severe air pollution has existed over the last decade. The experimental design involves hypothetical policy scenarios that describe changes in the health and visibility aspects of air pollution, and changes in policy cost (i.e., household energy bills).
The first issue I investigate in the thesis is whether losses from air quality deterioration are larger than gains from air quality improvement. Using a unique gain-loss experimental design that allows to measure utility gains and losses simultaneously, this thesis finds that people place more weight on air quality losses than gains. I also find that social capital plays a role in individuals’ preferences for air quality changes, and that it correlates with loss aversion preferences. Additionally, the findings provide evidence of non-compensatory behaviour and unwillingness to trade reduction of air quality for monetary compensation.
Environmental outcomes are often affected by the stochastic nature of the environment and ecosystem, as well as the effectiveness of governmental policy in combination with human activities. The second issue explored in this thesis is whether, and how, individuals incorporate uncertainty around policy outcomes in their decision making. Using a discrete choice experiment where the risk of outcome delivery is included in the design as an additional attribute, I find that respondents’ utility decreases when risk increases. However, people treat risk as if it is independent of its related policy outcomes in scenarios of both air quality gain and loss.
Following the investigation of how risk is taken into consideration in a discrete choice experiment, the third topic investigated is whether people’s environmental preferences are affected by the effects of risky choice framing. In a new experimental design, where policy is described as risky, the expected outcomes of the policy are set to be equal to those in a certain treatment where outcomes are riskless. The information of expected outcomes is embedded in the attribute to assist decision making. The results suggest that risky framing in policy scenarios has little effect on people’s air quality preferences.

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Identifiers

ORCID for Emmanouil Mentzakis: orcid.org/0000-0003-1761-209X

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