Assessing the value of clean air in a developing country: a hedonic price analysis of the Jakarta housing market, Indonesia

Abstract

This paper is motivated by the common argument that clean air is a luxury good and has much less or even no value in a less developed country. It applies a hedonic property value analysis, a method commonly used to infer the value of clean air in developed countries, using a combination of data on house values and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result suggests that air quality may affect property value in Jakarta, indicating a preference toward environmental amenities. Moreover, this study is one of the first hedonic studies that may potentially give comparable estimates of the value of clean air in developing countries.