We develop a framework to estimate willingness to pay (WTP) for clean air from defensive investment. Applying this framework to product-by-store level scanner data on air purifier sales in China, we provide among the first revealed preference estimates of WTP for clean air in developing countries. A spatial discontinuity in air pollution created by the Huai River heating policy enables us to analyze household responses to long-run exposure to pollution. Our model allows heterogeneity in preference parameters to investigate potential heterogeneity in WTP among households. We show that our estimates provide important policy implications for optimal environmental regulation.

Areas of Focus: Environment
Definition
Environment
Producing and using energy damages people’s health and the environment. EPIC research is quantifying the social costs of energy choices and uncovering policies that help protect health while facilitating growth.
Air Pollution
Definition
Air Pollution
Air pollution from fossil fuel combustion poses a grave threat to human health worldwide. EPIC research is using real-world data to calculate the effects of air pollution on human health...
EPIC-China
Definition
EPIC-China
China is indisputably critical to addressing the global energy challenge. China is one of the world’s biggest economies, its top carbon emitter, and among its most polluted countries. Yet, China...