If the Air Was Cleaner, Would We Be Happier? An Economic Assessment of the Effects of Air Pollution on Individual Subjective Well-Being in Chile

Abstract Air pollution represents a serious environmental concern in both developed and developing nations, with harmful effects on human health and populations’ well-being. The literature documenting this topic focuses mainly on developed countries and has limited evidence in the Latin American context. This paper assesses the impact of particulate matter on Chile’s individual subjective well-being. It uses individual self-reported measures of subjective well-being along with interpolation techniques to obtain the particulate matter measurements of 305 Chilean cities in 2013. Using an instrumental variables strategy, the main findings indicate that air pollution decreases people’s well-being. Its negative effect is robust to several specifications and becomes larger when the parameters’ potential bias is reduced. On average, Chileans are willing to pay 7.46–11.98 USD per month to improve their air quality. The results are also valuable for policy makers, helping them to justify implementing policies aimed at controlling industrial emissions and traffic congestion and increasing the number of monitoring stations across Chile.