Estimating the Value of Improving Air Quality in Tehran City Using Choice Experiment Method

Document Type : Research Paper


Department of Agricultural Economics, Faculty of Agriculture, Urmia University, Urmia, Iran.


Estimate Value Improve Air Quality in the Tehran City:
Application Choice Experiment Method

Air is one of the most important parts of the environment that its Pollution has destructive role in human life. Air pollution in Iran, is one of the biggest environmental problems which faces different regions of the country, especially Tehran. Tehran is very crowded and very busy, which also exacerbates the air pollution of this great city. Studies show that air pollution in Tehran has various effects, including The presence of airborne diseases, increased mortality and reduced horizontal visibility. According to studies by Tehran's Environmental Protection Agency, 70 percent of deaths in Tehran are due to respiratory and cardiac problems, which are directly or indirectly related to Tehran's air pollution. According to the World Bank, illnesses caused by air pollution annually as much as 0.02 percent of gross domestic product damage to the Iran's economy. The condition of air pollution in Tehran is acute. Effects of air pollution in the event of delay in implementing strategies to reduce this type of pollution may be worse. One of the most important strategies is necessary awareness and public participation in reducing air pollution. When the community will have an understanding of the benefits of clean air that knows with pollution what benefits loses. Benefits when better understood that monetary amounts are determined. Therefore, estimating the economic value of different effects of air pollution and estimating the willingness to pay individuals to improve these characteristics is necessary. In recent years, the focus on ecosystem services valuation is rising. In Iran, estimating the economic value of natural resources and estimating the cost of pollution and environmental degradation in the development process and computing it in national accounts is obligatory. In national accounts only consideration is given to the costs and benefits exchanged in the market. The cases where that are not tradable on the market are not considered, which will lead to market failure. Environmental resource valuation is a tool that determines the value of non-tradable goods and services in the market. Studies show that so far no study on the value of air quality improvement in Tehran has been conducted using the choice experiment. Therefore, this study is the first study to estimate the value of improving the quality of air in the southwest of Tehran using a choice experiment method.

List of properties of that commodity is selected to determine the value of each goods in the choice experiment. Price variable are added to the feature set for simplify of proposed choice set for respondents. In choice experiment method, there are several main options in each selection set, fixed option that shows the status of the current scenario and other options that show scenarios for improving the current status of that product or service. In a choice experiment, respondents are given a series of options with different levels of features and they are asked to choose the preferred option. The choice experiment is based on the theory of Lancaster microeconomic economics and the random utility theory(RUT).
The conditional logit model is estimated using the maximum likelihood method according to the equation below:
is an index variable that if the answer i chooses the option g, is equal to one and otherwise equal to zero. In other words, the dependent variable in this model is multiplicative (one, zero and zero), unlike the simple Logit model, which is dual (zero and one). The results of the conditional logit model are reliable f the options in the choice sets are independent. Otherwise, the nested logit model is estimated. In nested logit model, assumption of homogeneity variance is observed within each of these subgroups and the assumption of Independence‏ ‏Irrelevant Alternatives(IIA) is preserved within each subgroup. However, variances between different subgroups will be different. After estimating the parameters, WTP is obtained according to the following equation for all properties of the choice set:
In this equation, is the coefficient of the price property or marginal utility of income and is the coefficient of other characteristics within the choice sets.
The model used in this study is expressed as follows:
In the above model , and is the coefficients of the alternatives characteristics (X), the coefficient of interaction effects of socio-economic characteristics with price and coefficient of interaction effects of socio-economic characteristics with Alternative Speficed Constant(ASC) respectively. In the above model, Y is dependent variable that Indicates the choice of the optimal option among the three possible options in each choice set.
Data and statistics were obtained by completing questionnaires from households in south west of Tehran with simple random sampling method. each questionnaire includes the social, economic, health characteristics of the respondents and the choice sets (characteristics studied) and other sub-questions.

Findings and Discussion
The purpose of this study is to estimate the willingness to pay households to reduce each of the effects of air pollution in the southwest of Tehran include increased mortality, reduced horizontal visibility and increased washing costs. Choice experiment method was used to estimate the willingness to pay for each of effects of air pollution. The conditional logit model was estimated to examine the factors affecting the willingness to pay of households to reduce the air pollution. Results of Hausman McFaden's showed that the results of the conditional logit model are not reliable, so the nested logit model was estimated. Results of this model showed that the variables such as age, gender, number of children, educational level, income, awareness of air pollution in South West of Tehran and having a history of heart and respiratory disease are factors affecting the willingness to pay households. Results showed that average willingness to pay for improved levels of absolute and relative of mortality, respectively 102406 and 85359 Rials, for improved levels of absolute and relative of Horizontal viewing respectively 72202 and 24162 Rials, for absolute improved level of cleaning costs 35011 Rials. The average annual willingness to pay per household 319,140 Rials and value improve air quality in the South West of Tehran was obtained 118,705 billion Rials. About 64.8% of the households tended to pay for decreasing air pollution. 35.2% of people were not willing to pay for improving air quality due to reasons (government and polluters must pay, uncertainty of spend cost, low income). According to opinion households, the most common cause of air pollution in the southwest of Tehran is, respectively, timeworn and one-seat vehicles and factories in urban areas and traffic. Households suggested ways to reduce air pollution, including expanding subway lines, public transport and increasing the production of hybrid vehicles.


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