Health Benefits from Urban Air Pollution Abatement in the Indian Subcontinent

This paper provides estimates of household health production model for the urban areas of Delhi and Kolkata that measure the benefits from reducing urban air pollution. A system of simultaneous equations comprising of health production function, demand for mitigating activities, and the demand for averting activities is estimated using 3SLS and GMM methods of estimation. The primary data about the health status and socioeconomic characteristics of households were collected for a sample of 1250 households from each city. An estimate of the marginal willingness to pay function and welfare gains for a representative household for reducing air pollution to the safe level is obtained for each city. The estimate of annual benefits to all the households in each city is made by extrapolation to the total urban population. This estimate is found to be Rs.4896.6 million for Delhi and Rs.2999.7 million for Kolkata. Contact Address of authors: Institute of Economic Growth, Delhi University Enclave, Delhi-110007, India. Phone: 91-11-27667288 Fax: 91-11-27667410 E-mail: mnm@ieg.ernet.in gulati@ieg.ernet.in __________________________________________________________________________ This paper forms part of the Research Project `Valuation and Accounting of Urban Air Pollution: A study of some urban areas in the Indian subcontinent' funded by the South Asian Network of Economic Institutions (SANEI). We are grateful to the participants in the conference on Urbanization, Transport and Health in Asia at Australian National University, Canberra, February 2003, project research workshop at the Institute of Economic Growth, De lhi, May 2003 and the 12 Annual Conference of European Association of Environmental and Resource Economists, Bilbao, Spain, June 2003 for useful comments on an earlier draft of this paper. 2 Dr. M. N. Murty and Dr. S. C. Gulati are professors at the Institute of Economic Growth, Delhi. Mr. A. Banerjee is Research Associate at the Institute of Economic Growth, Delhi.