Willingness to pay for clean air: Evidence from diesel vehicle registration restrictions in Japan

This paper documents the effect of diesel vehicle registration restrictions introduced in
Japan in 2001 in reducing suspended particulate matter (SPM) concentrations. The focus
is on Aichi and Mie prefectures, home to a number of municipalities that were required to
implement these restrictions in 2001. The paper then uses this intervention to estimate
the causal effect of air pollution on land values. We obtain estimates of the elasticity of
residential land prices with respect to SPM concentration of between –0.4 and –1.0. The
revealed willingness to pay for the improvements in air quality induced by the intervention
in Aichi and Mie is estimated at about US$7 billion. We also find evidence that net inmigration
appears to be a key mechanism via which clean air was capitalized into higher
land values. The results are robust to a number of estimation approaches and sample
restrictions.