CHAPTER - 11

REVlEW OF LITERATURE

Debreu (1951), Malmquist (1053) and Shephard (1953) introduced the concept of

distance function in early 1950s in different contexts. Debreu formulated a radial

measure of productive efficiency in terms of 'co-efficient of resource utilization'.

Malmquist introduced the concept in terms of consumer theory. Ile constructed a

quantity index that is dual to the true cost of living index which shows the ratio of values

of distance function at diff'erent quantity situations, normalised on given utility level this

concept was introduced in the context of production theory, by Shephard (1953). He

formulated the input distant function and the duality result between the input distance

function and the cost function. Shephard (1970) proved the duality result betucen tht.

output distance h c t i o n and the revenue function and the input distance function and the

cost function. The distance function can play a profound role in the consumer and

produced theory. Comes (1 992) observes '.'.'."'

"In view of the prominence given to the distance function by Shephard (1953.

1970) in the development of duality theorems. it is surprising that it has received so little

attention since then. Fare (1988) discussed both the input and output distance functions

and analysed the relationship bettvecn the two. Distance functions are mentioned

sporadically by Fuss and McFudden (1978). but are rarely exploited systematically in

producer theory. Perhaps their time is yet to come". Distance hnctions represent

production technology, i.e. 'how inputs are turned to output', just as production. cost and

profit functions. Alternatively said, the distance functions can be used for analysing all

the economic effects that are interpreted by applying conventional production, cost, and

profit or revenue functions. Moreover, these functions have a number of desirable

properties which the conventional functional representations do not have (Iietemaki

1996, or Kumar 1999). 'fhese properties reveal the applicability of distance function

even in cases where the conventional functions cannot be used. Chambers et al. ( 1 994)

has shown that "the distance funciion is the unifying notion which links efficiency

measures, quantity indices and productivity indices". But Iletemaki (1996) observes

that," the main disadvanfage of distance functions is that their empirical application is not

as straightforward as production. cost and profit functions. In particular. the stochastic

(econometric estimation of distance functions is more involved than that of conventional

functions".

'The distance functions can be estimated in several nays. First. one can use a

non-parametric or parametric model. Second. the choice is between deterministic and

stochastic parametric modcls. Further. one has to choose from a number of different

functional forms and estimation mcthods. The most commonly used method in the

estimation of distance function has so far been the deterministic linear programming

method. The linear programming studies can be classified into two categories;

parametric and non-parametric. 1 lctcmaki ( 1 996) observes that the econometric or

stochastic application of the distance function have been rare. Indeed, Lovell et al.

(1990): "although empirical computation of distance functions using econometric

techniques is certainly in its infancy, mathematical programming techniques have been

used to calculate distance functions for many years now". Also the reccnt hook by Fare

and Primont (1995). which has a number of examples of how to compute distance

functions, do not provide any discussion of stochastic estimation I-letemaki (1996)

provides a description of the estimation of the stochastic distance function. The purpose

of this section ih lo present a brief review of empirical models of distance functions, with

an emphasis on models related to the topic of the present study.

Lave and Seskin (1973, 1977) measured the strength of association between

mortality and morbidity and specific air pollutants. The overwhelming majority of the

empirical results obtained, however, are not based on models of consumer choice.' As a

consequence, the dollar value of health benefits stemming from improved air quality

generally are estimated on an ad hoc basis and are therefore difficult to interpret.

Moreover, the absence of a theoretically justifiable health benefits estimation method

recently has become a more serious policy problem. This paper presents and empirically

estimates a simple model from whicn an intuitively appealing measure of health benefits

can be derived. In this model, individua!~ produce health capital in a utility maximizing

framework and are able to adjust their heheviour in order to defend against reductions in

air quality. These adjustments, which involve substituting medical care or other health

producing activities for reduced air quality, form the basis for the method used in making

the benefit or willingness to pay calculations. This method is empirically implemented

using cross- sectional survey data on adult workers drawn from households in St.Louis,

Missouri. From a policy standpoint, the empirical results are of interest because they

support the notion that individuals are willing to pay for better health resulting from air

quality improvements. In particular, illustrative estimates are presented showing that

St. Louis workers may bid as much as $24.48 annually in order to enjoy a 30% reduction

in outdoor ozone exposures.

A number of empirical studies have suggested that rather than having a single

point economic value, respondents in Contingent Valuation (CV) studies may instead

have a range of economic values in their mind or a valuation distribution (e.g., Cameron

and Quiggin, '1994; DuBourg et al., 1994). This notion has been directly incorporated

into several CV surveys that explicitly knowledge that respondents may face

uncertainties in answering valuation questions. For example. Li and Mattsson (1995)

assumed that respondents had incomplete knowledge about their true valuation of a

commodity and might give wrong answers in dichotomous CV surveys. After they

answered the valuation question. respondents were asked a follow-up question to measure

their confidence in thcir CV answer. I'his was used to characterise the degree of'

preference uncertainty. Kcrdy ct al. (1005) acknowledged that respondents night have

difficulty in resolving arnhivalcnt infbnnation presented in CV studies. so they offered

respondents the opportunity to express the intensity of thcir preferences. 'This enabled the

authors to estimate " regions of ambivalence" for their respondents. Welsh and Bishop

(1993) and Welsh and l'oe ( 1 908) presented a Multiple Bounded Discrete Choice

(MBDC) approach that asked rcspondcnts certainty-intensity questions over a range of

price thresholds. Their questions hnnat is also consistent with the assumption that CV

respondents may have a distribution or rangc of possible values.

Muller (1978) and Sims (1977')) estimated a fixed coefficient production model

using annual time series data fi)r the ('anadian pulp and paper industry to simulate the

reaction of the industry to those chnngcs ~ h i c h tilight be expected from mandatory

pollution control. This is one of the earliest attempts to analyse the impact of pollution

control on the pulp and paper industry using an econometric model. Muller found that

the increases in average total production costs resulting from secondary treatment of all

water-borne wastes varied from less than 3 percent for sulfate pulp mills to around

9 percent for sulfite pulp mills. Moreover the results indicated that overall output in the

industry would not decline by Inore than about 2 percent if cost increase averaged about

6 percent. Sirns (1979) examines the impact of an eMluent charge on wastewater in the

Canadian brewing industry, using a combination of time-series and cross-section data to

estimate a translog cost function. IIe found that a one percent increase in the charge for

BOD and SS substances would lead to a 0.57 percent reduction in the BOD effluent and a

0.45 percent decline in SS effluent. respectively. Since the early 1980s. the number of

empirical studies which h;ivc examined the impact of environmental regulations on

economic performance hiis ir~creascd significantly (Myers and Nakamura 1980; Pittman

1981, 1883; Gollop and Roberts 1983: Conrad and hlorrison 1089; Jorgenson and

Wilcoxen 1990; Barbara and hlc('onncl1 1000: Gray and Shadbegian 1993; 1905;

Morgensten et al. 1997: Mc('1clland and I lorowitr. 1999: Murty and Kumar 2001 1. l'hcsc

studies have examined the various cffccts of pol!ution control policy. including the direct

impact of regulation on fimis duc to t11e diw,crsion of resources into aabtecmnt capital and

an indirect effect due to changes in the production process and usage of inputs. The

ultimate aim of these studies has been to rlieasure thc effect of pollution regulation on

total factor productivity growth. On the other hand, some of these studies have also

analysed the cost effectivencss of the regulatory system itself. For the most part. these

studies are based on industry Icvcl data or, in a few studies, on plant level cross-section

data. There have been very few empirical studies, which have attempted to analyse the

effects of regulations using plant level panel data."

The most popular approach in the above attempts that try to incorporate the

impact of environmental regulations on firm, industry, or economy has been to use the

total amount of pollution control expenditures as a measure of the impact of pollution

control. This is the approach used for example in the Barbera and McConnell (1990)

study discussed above. The essence of the approach is that environmental regulations

force firms to invest in abatement capital and this crowd out productive investments.

However, Barbera and McConnell (1090) also take into account that the abatement

capital may have an indirect effect by making conventional capital obsolete more quickly

and may increase investment in conventional capital and improve productivity. In order

to quantify these impacts they estimate a translog restricted cost function employing

annual time series data for five industry sectors.

Gollop and Robers (1083) study the impact of sulfur dioxide emission restrictions

on the rate of productivity g r o ~ ~ h for a sample of 56 electric power utilities in :he CIS

over the period 1978-79. 'l'he cnipirical analysis is based on a translog cost function.

which includes a firm-specific regulatory intensity variable. The idea is that an incrcase

in the regulatory intensity shifts the cost function upwards and decreases productivity

gowth. Gollop and Roberts find that annual avcrage productivity growth in the electric

utility sector would have bccn 0.44 percent higher in the absence of the sulfur dioxide

regulation?

Non-Parametric Linear Programming Studies:

Perhaps the Fare et al. (1985) study was the first popular and extensive exposition

of how distance functions could be used to measure productive efficiency, using the non-

parametric method of computation. Fare et al. (1994) provide a number of examples

related to the measurement of efficiency and productivity change which apply non-

parametric methods for the computation of distance functions. Some important studies

about the measurement of productive efficiency using the non-parametric techniques of

computation include Fare et al. (1989); Yaisawrang and Klien (1994); Hakuni (1994);

and Brunn Land et al. (1995). 'l'he word non-parametric means that there is no

parametric functional form (except piecewise linearity) imposed for the model. The most

common method of computing these models is activity analysis. Hetemaki ( 1 996) states

that simultaneously with the growth of literature on efficiency measurement using

distance functions the operations research and management literature come up with the

Data Envelopment Analysis (IIEA). Like the distance function approach. the DEA uses a

similar activity analysis approach to efficienc) measurement. But the difference bet~teen

these two approaches is: distance functions are firmly based on neo-classical production

theory, whereas no such theory lies behind the DEA.

One of the disadvantages of this approach is that it proirides limited information.

Ijetemaki (1996) states that, "for the present purposc, i t has the drawback that it does not

directly provide information about the shadoh prices of output (or inputs). The non-

parametric fiontier is piecewise linear and, thus non-differentiable at the comers (where

the efficient observations are)" An even more important drawback of this approach is the

fact that it is deterministic and it docs not allow for random disturbances. which are out

of control of the firm. Moreover, this approach lacks the statistical properties of frontier

models based on non-parametric linear programming (Banker 1996; Grosskopf 1906).

The statistical properties however are still hard to derive (Hetemaki 1996).'

Parametric Linear Programming Model:

The distance function approach has also been used to derive the shadow prices for

inputs and outputs in the recent years. Most of these applications are based on the

translog linear programming model which uses the Aigner and Chu ( 1 968) method for

estimating parameters of the objective function (e.g. Fare et al. 1993; Althin 1994;

Grosskopf et al. 1995; Coggins and Swinton 1996: I letemaki 1996; Kumar 1999; Murty

and Kumar 2000). The derivation of shadow prices requires that all output distance

function be parametric. In order to estimate the output distance function, a parametric

functional form be defined. I he earlier studies in the literature (Fare et ai. 1993: Althin

1994; Coggins and Swinton 1 006: I letemahi 1006). have used parameterized distance

function as a translog form.

The advantage of the deterministic linear programming approach IS that i t does

not require any distributional assun~ptions (Nishimizu and Page 1982). I t is relatively

easy to use and in principle. allows for the computation of a large number of parameters

even with a small number ofobscwations ( I leternaki 1996). l'he major weakness of this

approach is that it docs not allow for random disturbances and provides no statistical

criteria for the consistency of results (1,ovell and Schmidt 1988; and Rarnaswamy 1994).

Thus in order to justify the approach it becomes necessary to assume that measurement

errors can be neglected or. that they arc all of the same (negative) sign. Moreover. the

important weakness for the present purpose is that the method provides no information

concerning the precision of the shadow prices (Hetemaki 1996). Finally, Greene (1 993)

observed, since expressiolis for their asymptotic covariance matrices have never been

derived.

The methodology of Fare et al. (1993) was employed by different researchers

differer~t countries, thus, Coggins and Swinton (1996) used this method for Wisconsin

coal burning utility plants to estimate the shadow prices of SO2 abatement. They

estimated these shadow prices to judge the effectiveness of the Clean Air Act amendment

1990, a market-based scheme to reduce US SO2 emissions that took effect in 1995.

Their results show that the overall average shadow prices of a marginal decrease in SO2

emissions was $292.70 in contrast 1092 dollars. l'heir results suggest that. investments

or operating decisions that cause a plant's emission rate to fall appear to cause an

increase in the marginal cost ol'abatement. that is firms with relatively high SO2 shadow

prices had the lowest emission rates. while the dirty plants had lower shadow prices.

'Iheir estimates can help planned compliance by utility managers to device compliance

strategies. Until it beccmes possible to estimate allowance demand and supply

relationships econometrically. the shadow prices derived through the use of distance

function can yield at least a hint of the prices that would prevail.

Conard and Morrison (1989) exan~inc the impact of pollution control on

productivity in the US, Canada. and Germany. They construct a non-parametric model

that explicitly recognizes the difference between pollution abatement and productive

capital and then use a framework that purges the impact of abatement capital on total

factory productivity growth. In the empirical application, the bias resulting from

abatement capital is computed for the aggregate manufacturing sectors of the US,

Canada, and Germany. The principal finding is that the bias, and thereby the impact of

increased pollution abatement capital on productivity growth is modest.'

Both of the above studies represent the typical approach of a majority of studies in

the 1980s, in that these two studies are based on aggregate time series data and try to

infer the impact of pollution control from abatement capital expenditures. Examples of a

somewhat different approach are the plant level studies by Pittman (1981) and Gollop

and Roberts (1983), Pittman (1981) examines the efficiency of the regulatory system by

comparing shadow prices of water pollution effluents beiween different mills, and he

analyses whether it is less costly for the larger rn~lls to control pollution than for the

smaller ones. Pittrnan estimates a translog production function using cross section data

from 30 integrated paper mills in Wisconsin and Michigan. According to the results. the

systematic differences in the shadow prices of water pollution parameters (marginal

treatment costs) indicate serious inefficiencies resulting from the prevailing regdatory

system. Secondly, Pittman interprets the positive cc)rrelation of pollution control

intensity with economies of scale as evidence that pollution control may have negative

allocation impacts on the industry. That is, treatment requirements increase the minimum

efficient size of a plant, thus increasing barriers to entry and decreasing competition in

the industry.

Kwan and Yun ( 1 990) used the method of distance functions and its duality to the

revenue function to estimate the marginal abatement costs of airborne pollutants of power

and coal fired power plants in Korea. The average marginal abatement cost were 310.6

thousand Won per ton for SOX, 146.7 thousand Won per ton for NOx, 1548.3 thousand

Won per ton for I'SP and 3.8 thousand Won per ton for C02 for the period of 1990-95.

These estimates were well within the range of results arrived at by previous studies in the

US. The wide variation in the MAC by the types of plant implies that Korea's regulatory

policy on pollution has not achieved the cost efficiency in reducing emissions.''

Fare et 31. (1993) provided an alternative method of calculating the shadow prices

of outputs including undesirable outputs. The study employed the duality theory rather

than constructing shadow prices from the abatement costs and provided producer-specific

measure of those shadow prices. I t obtained these shadow prices as part of the procedure

that also generated estimates of the structure of production technology as well as

produced a spmific measure of productive efficiency. For this purpose. they estimated

the output distance function and the estimated shadow prices of undesirable outputs

which reflected the opportunity cost in terms of forgone revenue of an incremental

decrease in the ability to frecly dispose of thcm. They estimated the shadow prices for

these US fms at the mean of data IIS$-155.33. -1 555.77 and -342.52 per ton for BOD.

particulates and SO2 respectively, Further they found that shadow prices varied across

the sample. Such differences suggcstcd that regulations in effect in 1976 in the US were

not achieving an efficient allocation of resources.

Meier and Munasinghe (1994), llc used Integrated assessment has been used

primarily as a research tool to provide insights into energy sector impacts and utility

planning. Investigations in IJS locales have been primarily in response to state

regulations mandating the recognition of external costs in public utility planning (for

example, RCGmagler, Bailly, Inc., 1094; Ottinger et a]., 1990, ECO Northwest, 1987).

Although integrated assessment provides a well-reasoned estimate of external pollution

damages and abatement benefits using a transparent and sound methodology, its potential

use in exploring the design of efficient abatement policy has been largely ignored.

Mendelsohn (1978) explored use of the integrated assessment in the choice of efficient

abatement strategy for a hypothetical plant in New Haven, Connecticut, evaluating equity

implications for the distribution of external costs across individuals and political entities

and the desirability of differentiated control regulations. The sole known use of

integrated assessment for policy design in a developing country has been within a multi-

objective analysis framework evaluating power investment alternatives in Sri ~anka . "

Analysis of MSW and its failure with policy perspectives are not very often found

in literature. Abduli M.A. (1095) has analyzed present status of SWM in Tehran and has

given policy recommendations regarding their generation, collection. on site handling.

storage, processing, recycling. transportation and safe disposal. l'hrough a detailed

survey all h c t i o n a l elements of present SWM system In Tehran were studied. Factors

affecting the important management issues in operations of fehran's SWM system are

discussed. Though such studies cxist abroad, they arc missing in Indian literature. Thus

a study on cost benefit analysis and policy recommendations (strengthening of recycling

industry in this case) would certainly complement municipal solid waste literature in

Indian context.

Pearce, (1996), "Economic Valuation and Health Damage from Air Pollution in

the Developing World , This study focused on the issues of Meta studies of air pollution

epidemiology have resulted in the use of transferable dose-response coefficients whereby

the statistical relationship betwecn air pollution and human health is applied outside the

countries of the original studles. The aim is to predict changes in premature mortality

and morbidity. Some studies then apply economic valuations in order to see if health

damage from air pollution should be treated as a priority concern in the countries to

which the coefficients are applied. Preliminary work suggests that some forms or air

pollution, notably Inhalable particulate matter and ambient lead, are serious matters for

concern in the developing world.12

Around the sanle tinic, Iletemaki ( 1 996) employed the distance functions to argue

for the effects of water pollution regulation in eight pulp plants in Finland. which were

observed over a period of 10 years (1972-90). I'ollution control usually requires firms to

adjust their production proccsscs. the purpose of the study was to examine to what extent

these adjustments affcct firm'^ revenues and performance in general. Her study differs

from the previous literature in that it uscs a stochastic distance function as well ac a

deterministic one, by cmplojing plant-lcvel pancl data and imposing no a priori

restrictions on the value of'the shadow prices of pollution. In her stud). a novel ' t w -

stage" approach, which combines dctenninistic non-parametric linear programming with

a stochastic econometric model. is used to cstiniate the distance functions. Such a tjpc of

extension enables the estimation of a more general model. whose statistical significance

can be explicitly assessed.

Wang (1997a & I997b) has argued that uncertainty is an inherent characteristic of

people's economic valuation process for both market and non-market commodities. and can

never be l l l y resolved. In this paper presents an empirical study of people's willingness to

pay (WTP) for an air pollution control program conducted in Sofia Bulgaria. Two surveys

were conducted in Sofia: one using the stochastic payment card and the other a refercndum

CV question. The CV scenario presented to the two groups of respondents was the same. The

study thus provides a comparison ol'estimated WI'I) using the stochastic payment card and the

traditional referendum contingent valuation approaches. I h e results show that the traditional

refuendum approach gave much higher estimates of individuals' WTP than the stochastic

payment approach.

The enviro~nental conditions ir: large urban regions, air pollution measures are

generally more reliable and comparable than water pollution data. Among widely measured

air pollutants, the international health community currently believes the most damaging to be

suspended particulate mater ((lust). Ni~merous health studies in low-and high-income

countries have associated high concentrations of suspended particulates with higher-than

normal rates of death and illness from cardio-pulmonary problems. Over time. health research

has n m w e d its focus from all suspcndcd particulate matter (SPM) to particles less than 10

microns in diameter (PM-I 0) and. most recently. to particles whose diameters are less than 2.5

microns(PM-2.5). Atmospheric monitoring is acliutant to these findings. but PM-2.5 readings

remain scanx in low-income countries. Since all p'articulate concentration measures are

correlated however, even Sflhl measures provide useful information about pollution that

severely damages human health.

Aerobic composting, roof composting, vemiiculture etc. (Excel, 1999; III'

Bombay, 1997). Improved technologies have also been demonstrated and there

economic feasibility (Bhide, 1994; Yedla, 2000). Vemia in 1999 demonstrated and their

economic feasibility (Rhide, 1004; Ycdla, 2000). Verma in 1999 demonstrated an

integrated solid waste management model for MSW managenlent. However. all these

demonstrations are local in nature and did not concentrate on analyzing existing policy

and economic instruments by considering all important costs and benefits involved.

Hence, a study undertaking a thorough cost benefit analysis, which could support policy

recommendations, would be an important contribution to the literature of MSW

management in India.

Adverse impacts due to mismanagement of municipal solid waste are extensively

documented in literature. tlealth impacts due to waste handling and poor waste

management in Denmark are documented by Malmros et. a1 (1992). They have

concluded that occupational health prohlem in work environment in waste sorting plants

arise from the presence of organic dust. microorganisms and/or their constituents.

Pollution due to leachate afr'ecting surface water bodies and groundwater is also a

common problem. Gutman ( 1994) found that 7% of Reynosa's population is exposed to

considerable health hazards fiom solid wastes, and further 25-33% face 'moderate' risks.

The main risks are gastrointestinal and skin diseases. with an unknown scrious element

because it seldom includes wastes from hospitals and industries.

Chestnut, Ostro and Vichit-Vadahan (1997),"'I'ransferability of Air f'ollution

Control Health Benefits Estimates from the United States to Ileveloping Countries:

Evidence from the Bangkok Study", This study focused on the benefits to human health

through reductions in particulate matter air pollution. a common pollutant in the urban

environmmt. The authors summarizes the result of a set of health effects and economic

valuation studies conducted in Bangkok. Thailand, concerning particulate matter air

pollution and highlight what thcse results imply regarding how transferable results from

other countries are for assessing health benefits of particulate matter reductions in

Bangkok. Comparing the willingness to pay (WTP) values from Bangkok to U.S.

estimates, this study finds that Bangkok residents are willing to pay a higher share of

their income to protect their health. A plausible explanation provided for this result is

that health may be seen as a basic necessity like food and shelter.I3

Cropper. Simon, Alberini. Arora and Sharma ( 1 997)," The Health Hencfits of Air

Pollution Control in Delhi". 'I'hir paper reveled that the levels of particulate matter to

daily deaths in Delhi, India, between 1091 and 1994. The focus is on Delhi because it is

one of the world's most polluted cities. This study concludes: (a) the irnpact of

particulate matter on total nun-trauma deaths in Dclhi is smaller than effects of found in

the United States. (b) the impacts of air pollution on deaths by age group may be very

different in developing countries than in the United States. where peak effects occur

among people aged sixty-five and older. In llelhi. pcak effects occur between the ages of

fifieen and forty-four, implying that a death associatcd with air pollution causes more life

years to be lost.''

Alberini and Krupnik (1997)." Air I'ollution and Acute Respiratory Illness:

Evidence from Taiwan and I o s Angcles", This paper explores the approprlateness of

concentration-response function transfers by comparing two health studies conducted

following a similar format -- but !ears apart - in 1.0s Angelcs and Taiwan. Daily records

from a diary type epidemiological stud! are used to fit Logit equations predicting the

probability of experiencing minor acute respiratory symptoms as a function of pollution

and weather variables, individual characteristics, and health background and proxies for

reporting effects. 15,16.17,18.19

Morgenstem et al. (1997) explores the relationship between reported expenditure

and economic costs of environmental protection in a number of major manufacturing

industries in US. Their results are based on plant level data. They employ a cost

function modeling approach that involves three basic steps. First, they treat real

environmental expenditure as a second output of the plant, reflecting perceived

environmental abatement efforts. Second, they model the joint production of

conventional output and environment effort as a cost minimization problem. 'I'hird, they

calculate the effect of an incremental dollar of reported environmental expenditures at the

plant, industry and manufacturing sector levels. '[heir approach differs from previous

work with similar data by considering a large number of industries, using a cost function

modeling approach, and by paying particular attention to plant specific effects.

Conclusions from the above studies. and from the studies summarized elsewhere (e.g.

Christainsen and Tietenbcrg 1085) indicates that pollution control and environmental

regulations have had an adverse effect on firm or industry perfomlance hut that it has not

been large in magnitude. Jafte et al. (1995) conclude in their survey of the impact of

environmental regulations on the cornpetitii~eness of the IIS manufacturing sector thdt,

"there is relatively little evidence to support the hypothesis that environmental

regulations have had a large adverse eftkct (111 compeiiti\rcness. however that elusive term

is defined9*'

Aunan, Patzay, Aaheim and Seip (1998)," Health and Environmental Benefits

from Air pollution Reductions in I lungary". The theme of this study is to assess the cost

and benefit of the implementation of a specific energy saving program in Hungary. They

consider the possible reduced damage to public health, building materials and agricultural

crops that may be obtained from reducing emissions of important air pollutants and also

how the program contributes to reduced emissions of greenhouse gases. The measures

are described in the National Energy Efficiency Improvement and Energy Conservation

Programs (NEEIECP), elaborated by the Hungarian Ministry of Industry and 'Trade and

accepted by the Government in 1994. The energy saving expected from the program is

approximately 64 PJIyear. The benefits were estimated using monitoring data and

population/ recipient data from urban and rural areas in Hungary together with exposure-

response functions and valuation estimates mainly from western studies. Their analysis

indicates that the main benefit from reducing the concentrations of pollutants relates to

public health and that reduced prevalence of' chronic respiratory diseases is an important

effect. Reduced premature mortality is also important and the estimated attributable risk

of air pollution to excess mortality at present is approximately 6%. The estimated annual

benefit of improved health conditions alone is likely to exceed the investments needcd to

implement the program. In addition thcre arc significant benefits due to reduced

replacement and maintenance costs for building materials (30-35 million IJS$ annually in

Budapest only). The damage to crops due to ozone is large, but a significant

improvement in Hungary depcnds upon concerted actions in several countrie~.".~'

Bart D. Ostro, Gunnar S. Esheland. I'arhan Feyzioglu and Jose Miguel Sanchez

(1998); Air Pollution and Health 1:ffects: A stud? of Respiratory Illness among Children

in Santiago, Chile". In this study they explores air pollution IS found to contribute to

respiratory disease among children in Santiago. Chile. Reductions in a range of

symptoms from coughs to bronchitis will be among the benefits if the city is successful in

reducing concentrations in the air of small dust particles (I'MIO). The author have

previously argued that existing dose-response functions for the health effects of air

pollution can be adjusted and transferred when local estimates are not available (Ostro,

1992, Ostro et. al, 1996). They have also argued that local estimations in developing

countries are needed to test this approach and in order to enrich the literature in general,

to produce better estimates under a wide range of conditions. In Ostro et al. 1996. it was

found that the association between air pollution, measured by small dust particles

(PMIO), and premature mortality. was significant in Santiago and consistent with what

one would expect based on studics in industrialized countries. This study estimates dose

response function for respiratory disease among children based on data from public

clinics in Santiago. Respiratory diseasc is found to be significantly affected by air

pollution measured as PM10. The effect. for children under I5 (and subgroups) is robust

to the: inclusion of a wide range of covariates and alternative specifications. ozone.

another pollutant measure. is also ti)und to have an effect on respiratory clinic visits. I'he

study contributes to the literature in several ways. Internationally. morbidity effects haw

typically been found in cross- section studies. or in prospective studies following a panel

of predisposed children. such as asthmatics. This study is important in finding scch an

effect for a larger population of' childrcn with more general characteristics. A p ~ t from

helping to learn about the underlying cpidcmiological relationships, such results are

usehl demand if one wants to conduct cost-benefit analysis of air pollution col~trol. since

this requires estimation of health ctfects for the general popuiation. Secondly. ihe study

adds to much needed evidence on the benefits of pollution control in developing

countries. Increasingly, cities and countries in the developing world realize that

environmental management involves benefits, not only costs. Evidence on health effects

will be one of the inputs that can strengthen the policy making process. To date. only few

studies involving children have been made internationally. This study, and Ostro et al.

(1996) was initiated by operational support to an environmental study in the LAC region,

and was given additional funding from the World Bank's research committee when a

need for research was argued. and promising data and collaborators were found. l'he

LAC study completed cost benefit analysis of air pollution control in Santiago, and found

that modestly estimated health benefits exceeded pollution control costs by more than 50

percent.

Larson, Avaliani, Golub. Kosen, Shaposhnikov. Strukova. Vincent (1995)."The

Economics of Air pollution Hcalth Kisks in Russia: A case study of Volgograd", This

study used a combined health risk assessment. cost-effectiveness analysis. and benefit

cost analysis is undertaken for direct particulate emissions from 29 stationary sources

polluters in the city of Volgogriid, Kussia. Annual particulate -related mortality risk

from these stationary sources are estimated to be substantial. with an estimate in the

range of 960-2,667 additional deaths per year in this city of one million. The majority of

these risks are attributed to two major facilities in the northern part c;f the city. For

several emission reduction projects. the cost-per-life saved was estimated to be quite low.

The total net benefits to the city of implementing five of the six identified projects,

leading to roughly a 25% reduction in mortality risk, are estimated to be at least &40

7 1 '4.25.!h.!7.?8 million in present value terms.' .'

McCubbin and Delucchi, (1099). "The Hcalth Costs of Motor-Vehicle Related

Air Pollution", Motor vehicles have significantly larger health costs than previously

reported. Particulate is the most damaging pollutant, while ozone and other pollutants

have smaller effects. Diesel vehicles cause more damages per mile than do gasoline

vehicles, because of greater particulate emissions. Very fine particles appear more

dangerous than larger particles, and combustion particles appear more dangerous than

road dust. The possibility cannot be ruled out that ozone is linked to mortality and

chronic illness, effects, which are costly and would considerably raise the costs of oLone

pollution. These results suggest that emphasis should be placed on the regulation of

particulate. 2930,nl

Chen and Vine (1999), "A Scoping Study on the Costs of Indoor Air Quality

Illness: An Insurance Loss Reduction Perspective". The number of indoor air quality

(IAQ) related health complaints in comniercial buildings. and the frequency of litigation

over the effects of poor IAO is increasing. These increases have ramifications for

insurance carriers, which pay for many of the costs of health care and general commercial

liability. However, insurance companies know little about the actual costs from poor

IAQ in buildings. This paper reports on thc results of' 3 literature search of buildings-

related, business and legal databases. and interviews with insurance and risk managenicnt

representatives aimed at finding information on the direct costs ;o the insurance industry

of poor building IAQ, as well as the costs of litigation. The liter'iture search turned up

little specific cost infon~iation, but indicated that there is strong awareness and growing

concern over the! "silent crisis" of IAQ and its potential to cause large industry losses.

The source of these losses includes both direct costs to insurers from paying health

insurance and professional liability claims as well as the cost of litigation. In spite of the

lack of data on how IAQ related health problen~s affect their business, the insurance

industry has taken the anecdotal evidence about their reality seriously enough to alter

their policies in ways that have lessened their exposure."

McClelland and Horowit~ (1999) study plant level data on actual and permitted

levels of water pollution emissions for the pulp and paper industry. There is widespread

and substantial over-compliance with the relevant regulation; aggregate B011 emission in

1992 was only 50 percent of the amount allowed. Over compliance appears to imply a

zero marginal abatement cost and its prevalence therefore has the potential to

substantially change the debate ovcr the costs of regulation. They show instead that plans

incurred substantial costs to over comply. Marginal abatement costs were roughly

$1 300Iton of BOD in 1992.l.'

Kumar (1999) perhaps madc the first study that applied the distance function on

lndian data. Kumar estimated the marginal abatement costs ot' PM 10 using information

from 33 coal-fired thermal po~ ic r stations 1i)r the year 1007-93. The :;hadow pricc

estimated was Rs.319 per kg tilr 1)hIlO. hks t of the applic~tions of the distancc

functions have been based on the deterministic linear programming approach: Sew

econometrics studies exist. I'hc purpose of his study was to provide some evidence on

the performance of diffcren~ mcthods in estimating output distance functions. In

particular, results from deterministic and stochastic approaches and fi.om using dif'ferent

functional fonns of distance function are compared. l'he results show that both

approaches produce negative shadow prices for the air pollution variables. llowever, the

results from the stochastic nlodcl arc more stable. Also the results stress the importance

of carrying out a sensitivity analysis when using the deterministic aPproach,j4

Chattopadhyay (1999) also estimates the demand for air quality using data from a

single market (Chicago in 1989 and 1990), but he identifies the parameters in the air

quality demand function by imposing functional form restrictions. Generally, these

restrictions are questionable since theory offers little, if any, guidance on the functional

forms of these equations (Mendelsohn 1085). Chattopadhyay explores the impact of the

functional form restrictions by estimating several different house price and demand

equation specifications. Hc finds that the estimates are fairly similar across

specifications. Chattopadhyay includes particulate matter (PM-10) and sulfur dioxide

(SOX) in his regressions, and obtains a range of values for the MW I'P for a one unit

reduction in PM-10 of $268 to $163 and for SOX of $883 to $1,030.

Another means for obtaining consistent estimates of the second-stage demand

equations is to use information on multiple markets.' One of the first examples is

Palmquist (1982b, 1983) who is the only researcher to estimate air quality demand

equations based on data from multiple markets. He uscs s:iles data for 20 cities in the

United States in 1977 which includc inlormation on the house act the buyer. Census

information on the tract is which the house is located, and air quality measures obtained

fiom the U.S. Environmental protection Agency's air monitor data tapes.

The results from the 20 linear house price regressions me generally as expected,

although a number of the pollution coefficients are the wrong sign. Linear air quality

I Mcndelsohn (1984) Rockstarl ct ;11 ( 1987). Smith i~nd Kaoru (1987). and 1:nglin and Merldclsohn (1991) estimate hedonic travel cosl cqu;~tions to obtain prices fix second stage demand equations for site characteristics. These studies are not revicwed here since they involve ncither hedonic house price nor air quility demand equations.

demand equations are also estimated and the price and income elasticities are small but

usually significant. The linearity of the hedonic regressions allows the demand equations

to be consistently estimated by OLS but it is unlikely that this is the correct specification

for all twenty cities.'

Other studies where characteristic demand equations are estimated (though not for

air quality) using prices obtained from hedonic house price cquations for multiple

markets are Bajic uses segmentation in the Toronto housing market in 1978 as a means

for obtaining variation in the marginal price schedule. He estimates demand equaiions

for five housing characteristics; usable outside lot area, floor area. and three variables that

measure transportation attributes. Although Bajic uses the Box-Cox specification for

house price hedonic, he estimates the demand equations by 01,s. which is inconsistent,

since the prices are endogenous. He obtains approximately unit om-price elasticities for

all but floor space, which is highly inelastic. '1 he income elasticities are all positive but

quite small.3s

Alberini and Krupnik (2000). in their paper "Cost of illness and Willingness to

pay Estimates of the Benefits of Improved Air Quality: Evidence fiom 'raiuan"

compared the cost of illness (COI) and willingness to pay (WTP) estimates of the

damages fiom minor respiratory symptoms xsociuted with air pollution using data from

a study in Taiwan in 1991-02. A contingent valuation survey is conducted to estimate

WTP to avoid minor respir~tory illnesses. Health diaries are analyzed to predict the

likelihood and cost of seeking relief from symptoms and of missing work. As predicted

I Palmquist (1984) uses n suhsct ol'this dul:~ scl lo estlrn;~tt. dc~nand equations for four housing ch;lrac~cristics: square feet of living area, number of hi~throonis, tllc percentage of the adult population in tile ccnsus tract that graduated from high school, and racial homogcncit!. hut not for air quality.

by estimates, exceeding the latter by 1.61 to 2.26 times, depending on pollution levels.

These ratios are similar to those for the United States, despite the differences between the

two

Thanh and Lefevre (2000), "Assessing tlealth Impacts of Air Pollution from

I'lectricity Generation: The Case of Thailand". This study apply the impact pathway

approach (IPA) to estimate health impacts and corresponding danlage costs of sulfur

dioxide (S02) and emissions of fine particulate matter (PMIO) liom four power units

using different he l s (lignite, oil. natural gas. and coal) at four locations in Thailand. The

results show that the damage cost related to health effects of electricity generation in

Thailand are relatively small, but not negligible, ranging from 0.006 U.S cent to 0.05

U.S. cent per kilowatt-hour (in 1095 dollars). Damage costs to the public health due to

SO2 and PMlO emissions from clcctricity generation not only depend on fuel and

generating technology but also depend strongly on power plant location. This implies

that the assessment of adverse health impacts is very important for technology choice and

siting of new power plants.'7

Smith (2000), "National burden of disease in India froni Indoor air pollution". In

this study they focused on the issucs of a number of quantitatike epidemiological studies

of specific diseases have been done in de~cloping countries that for the first time allow

estimation of the total burden of disease (mortality and morbidity) attributable to use of

solid fuels in adult women and young children. uho jointly receive the highest exposures

because of their household roles. Few such studies are a~ailable as yet for adult men or

children over 5 years. This paper evaluates the cxisting epidemiological studies and

applies the resulting risks to the more than three-quarters of all Indian households

dependent on such fuels. Allowance is made for the existence of improved stoves with

chimneys and other factors that may lower exposures. Attributable risks are calculated in

reference to the demographic conditions and patterns of each disease in India. Sufficient

evidence is available to estimate risks most confidently for acute respiratory infections

(ARI), chronic obstructive pulmonary disease (C'OPD), and 11mg cancer. Estimates for

tuberculosis (TB), asthma, and blindness are of intermediate confidence. Estimates for

heart disease have the lowest contidence. Insufficient quantitative evidence is currently

available to estimate the impact of adverse pregnancy outcomes (e.g., low birthweight

and stillbirth). The resulting conservative estimates indicate thrt some 400-550 thousand

premature deaths can be attributed to use of biomass fuels in these population groups.

llsing a disability adjusted lost !ik year approach, the total is 4-6% of the lndian national

burden of disease, placing indoor air pollution a.5 a major risk factor in the country

Indrani Gupta (2000). "Willingness to A ~ o i d Health Costs Results from a Delhi

Study". This study described \+as undertahen with these questions in mind. Ilowever, to

truly do justice to the whole range of Issues, one needs to plan on a much larger study,

not only in terms of the sample. hut also for including other players like the government,

health care providers, and any other organisation that is currently providing insurance.

formal or informal. Howcker, son^ interesting results cnlerge from the above analysis.

The study showed that the willingness to participate in insurance programmes is the least

among those who have some foml of current coverage. 'These are mainly the middle

class population in Delhi. On the other hand. thosc most willing to participate are the

poorer households. At the same time, these households are unable to participate in

programmes, or would be unable to participate because of the perceived high premium of

the schemes. The well off households from the high income areas on the other hand are

somewhere in -between these two extremes; thcy are more willing to participate than the

middle class, but less than the poor class. This is interesting, because most of these

households have a lower expenditure on health relative to their income, and in addition

do not consider the premiums too high. Their higher ability to pay may be in fact a

deterrent to participating in insurance programmes (because they can always access the

private sector), since they do not yet see the usefulness of such participation.39

The preceding discussion iniplics that there is a significant willingness to

participate in health insurance progmlmmes of households that may not necessarily look

very promising to the insurance companies - cither from their ability to pay status or

from their risk of illness status. llowever, it is contended here that with careful planning,

it should be possible to use this willingncss so that the outcome is beneficial to both the

insurer and insured. Lower premium rates are an essential pre-requisite for this. But that

can only happen if those who are least willing to participate are brought into the net of

insurance programmes. In India. the middle class IS the lhrgest expanding class.

especially in cities like Delhi. Without getting them and of course the high-income

households into the pool, it is linlikely that private insurance will be tenable, from both

the business as well as equity point of view. I low will those who think they are already

covered be convinced that they are being offered a different and better product? While

this will have a lot to do with packaging, it is also important to realise that important real

differences have to be there between the current and the new system. Without offering a

real alternative, it is unlikely that the middle class would be persuaded.

K.D. Godkhindi, V.B. Doshi, S.V Shetye, J.K. Gregrat, R.B Natu V.D. l'atade and

S.R. Karnat, A Cross sectional Comparative Study bctween 3 Urban Communities

(inclusive of slums) with different Air Pollution Leve!s and a Rural Community for

Health Morbidity and Lung Function". 'This study focussed 3 urban and slum

communities fiom areas with high, medium and low air pollution (5213, 9235 and 470r3

subjects) along with a rural control community situated 30 km, southwest of Bombay

(3124 subjects) in 1980-81 was carried out. 'There were significant differences for SO2

and Nox between 4 localities as also for age, sex occupation, housing and income among

these communities; slums had much poorer surrounding. The prevalence of tobacco

somoking in males of 4 localities was 15.8% (rural), 16.7 to 17.6 YO (residential urban)

and 24.4 to 30.7% (urban slums) respectively.40

A history of diarrhea was more frequent in all urhan communities (particularly

high: 12.6%) as compared to thc rural group (5.6%) P<0.05). Breathlessness was seen in

10.0% in the urban high' area and 3.0 to 3.8% in other communities except slum subjects

of the 'urban medium' area (22.4). chronic dry cough was seen oftener in the urban

medium area (29.5% residential and 74.9% slum subjects); productive cough for 3

months or more) was seen in 2.7% (low). 3.8%(medium) and 5.8%(high) of the urban

residentid communities and 3.4 O/o rural subiects. 'The slum subjects from two more

polluted areas showed a higher prevalence. All the slum subjects (particularly from the

'urban medium' area), had a greater history of frequent colds. The prevalence of raised

blood pressure was higher in more polluted (particularly the urban high) areas and slums

had a lower prevalence. The urhan high community also showed a greater evidence of

obstruction on lung function.

V.D. Patade, V.B Doshi, S.R. Kamat, A.G. Ubare, K.N Konde, V.Sanjivani V

Shetve, Varsha Shah, Janki K Gregrat, V.N. Papewar and A.G. Sunaje," Fluctuations of

Daily Air Pollution Levels and Respiratory Synlptoms by fIealth Diary in 4 Communities

from the prospective Health Survey, Bombay". As part of 3 year study of health

morbidity in relation to air pollution around Bombay, of 4129 subjects 2232 were chosen

to record daily health diary. By end of third year 1338 subjects kept it regularly; major

causes for lapses were change of residence and noncooperation. There were no

significant differences in the trends of each area over 3 years except in the urban medium

area where with a decline in the pollution, the morbidity decreased. C;enerally. the urban

high area showed the highest SO2 and SPM levels. The levels of NO2 were highest in

1978 but in later 2 years these were similar to the urban medium area. 'I'he latter site had

lower SO2 out similar. SI'M levels. The urban low' area showed low SO2 moderate

NO2 and high SPM levels. The rural area had only high SPM l e ~ l e s . ~ '

The Prevalence for commc,n colds were highest in the urban medium area around

30-55 percent; those for cough were 1,-45% and dyspnoea 2-7 percent. 'The respective

values for the urban high area were 15-35% (colds), 8-19% (cough) and 1 4 %

(dyspnoea). The values for the urban low area were 5-20% (colds), 4-19% (cough) and

up to 3% (dyspnoea). The prevalence for the rural suL$ecct was very low. Generally thc

worst month was August, then September. May and June. The prevalence for common

colds was worst in monsoon months. All the urban areas had high prevalence for

diarrhea. The trends revealed a significantly high morbidity around days with higher

SO2 pollution in all urban areas. I'he monthly trends revealed that the fluctuations in

colds and cough corresponded broadly to SPM levels in 1978, 1979 but to SO2 in 1980

(when SPM levels were lower). There was no relationship with the duration of a

particular symptom but to the ititensity as reflected by need for medical treatment. It is

included that in Bombay, the health morbidity fluctuates to a significant degree with air

pollutant fluctuations.

Glen A. Fairchild, D.V.M. (2000), " IIcalth Effects of Sulfates and Sulhr

Dioxide: Their lielationship to Ambient Air Quality Criteria'. This study focused on the

issues of Environmental protection Agency is charged with the responsibility of

developing standards for air quality throughout the nation, in part, based upon public

health considerations. One of the standards. which have been developed, is for

atmospheric s u l h dioxide. Inherent in this standard has been a concern with sulfur

oxides in general and atmospheric particle matter. Recent epidemiological evidence from

the CHESS program of the FI'A has stimulated considerable interest in particulate sulfur

oxides in the a t r n ~ s ~ h e r e . ~ ~ , ' ~ I will review the current state of knowledge about health

effects of sulfur oxides and some of the problem areas in which attention is being

focussed. The health consequences of' sulfur dioxide inhalation has been of long standing

concern to public health officials in both occupational health and the general population,

especially in urban industrial areas. This gas was one of the first gases to be commonly

monitored by environmental scientists and was used as an index of atmosphere pollution,

especially as an index of fossil fuel combustion. Numerous independent epidemiological

studies conducted in the United Stares, Great Britain, and Japan and elsewhere have

demonstrated that under certain conditions sulfur dioxide and suspended particulate

matter are associated with increased occurrence of disease, especially respiratory or

cardio respiratory d i s e a ~ e s . ~ ~ . ~ ~ In 1973 an epidemiological study from the CHESS

program of the Environmental protection Agency stimulated renewed interest in the

health effects of sulfur oxides when it reported that significant health effects were

associated with particulate sulfur oxides at much lower levels than for sulfur dioxide.

The study reported that an increase in the number of asthma attacks in two American

cities were more closely correlated with total suspended soluble sulfate (TSSS) than with

sulfur dioxide alone or total suspended particulate matter. A later report from the CHESS

program also indicated that several other diseases in addition to asthma were better

correlated with TSSS than with sulfur dioxide.

Production models have not analyscd the joint production of multiple outputs

(good and bad outputs) and the pollution outputs have not been incorporated directly into

the models of production technology (with the exception of Pittman 1983: and Murty and

Kumar 2001). However. as shown, for example by Pittman (1983). Uimonen (1992).

Fare et al. (199?), Kumar (1099) and the material balance approach (Kneese et al. 1970).

the joint output framework seems intuitively preferable. For example. in the case of a

water polluting industry the fresh water entering as an input in the production process

gets contaminated with different kinds of substances and is transformed into an

undesirable output. The importance of including bad outputs directly in models of

producer behaviour was stressed already three decades ago by Shephard (1970: 205).

who noted that," for the future where unwanted outputs of technology are not likely to be

freely disposable, it is inadvisable to enforce free disposal of inputs and outputs. Since

the production function is a technological statement, all outputs, whether economic goods

are wanted or not, should be spanned by the output vector y".

Moreover, the conventional studies have implicitly assumed that the firms are

operating on the production frontier and that pollution control or regulat~on does not have

an impact on production efficiency. However, as later studies have indicated, these

assumptions are unlikely to hold in many instances (e.g. Fare et al. 1989, Hakuni 1994;

Yaisawarng and klien 1994; Porter and van der Linde 1995; Murty and Kumar 2001).

Finally, with the exception of production functions, all the other conventional hnctions

used to represent production technology require data on prices. This is an important

shortcoming particularly for empirical environmental economics studies. As Jaffe et al.

(1 995) have stated.46

"Even for the United States where data on environmental compliance costs are

relatively good, compliance expenditure data are notoriously unreliable. The problem is

more pronounced in other OECD countries, whose environmental agencies have not

typically tracked environmental costs. Thus, one may have found little relationship

between environmental regulations and competiti\eness simply because the data are of

poor quality." As will be argued below, the distance function approach can potentially

avoid the above problems. In the context of the impact of environmental regulations on

firm or industry, the distance function approach and the weak disposability of undesirable

outputs was apparently first suggested implicitly in the studies by Fare ct al. (1983.

1986). They used non-parametric linear programming, the weak disposability assumption

and the axiomatic approach of Shephard to compute the impact of environmental

regulation on efficiency, although not explicitly in ternls of distance functions but rather

in terms of output correspondences. The parametric linear programming study by Fare

et al (1993) was the first study to explicitly use the distance function approach to derive

the shadow prices of undesirable outputs.

Hailu and Veenan (2000) cmploy a parametric input distance function that

incorporates both desirable and undesirable outputs to provide a more complete

representation of the production technology from which environmentally- sensitive

productivity and efficiency measures were generated. This framework also generates

pollution abatement cost estimates that are useful for policy making. Perhaps this is the

first study that used the input distance function to estimate the shadow prices of

pollutants. An input-based Malmquist index of productivity growth that appropriately

credits the producer not only increases in marketable but also the production of improved

environmental quality through pollution-abatement activities is derived from the input

distance functions. This method was applied to the time series data for the period 1959-

94 from the Canadian pulp and paper industry. Their shadow price estimates indicate

that the marginal cost to producers of pollution control has been rising. The main

conclusion of this study was that productivity improvement from the social v i e ~ ~ o i n t has

been stronger than conventional measures would suggest."

Several studies estimate the marginal price of clean air by examining the effect of

air pollution on house prices (see Smith and Huang (1903. 1995) for a review) but few

take the additional step of estimating air quality deniand equations. Studies by Nelson

(19780 and Harrison and Rubinfeld (1978) are two of the first to utilize the hedonic

theory developed by Rosen (1974) who proposes a two-stage procedure which uses the

marginal prices from the first-stage hedonic regression to estimate the second-stage

demand functions for characteristics. Nelson and IIarrison and Rubinfeld utilize data

from a single city. This requires strict assumptions for the demand functions to be

identified (Brown and Rosen 1982; Epple 1987). Both studies use ordinary least squares,

(OLS), to estimate air quality demand equations, which is inconsistent in this situation.

Fredrik ('arlsson and Peter Martinsson (2001),"Willingness to Pay for reduction

in air Pollution: a multilevel analysis". 'l'hey explore the multilevel model approach to

analyzing contingent valuation surveys of individual's willingness to pay for reductions

in the level of air pcllution. It is likely that individuals living in the same area are

exposed to the same level of air pollution. and accordingly these individuals' valuations

of a reduction may be correlated. 'I hus, the dam have a hierarchical structure with

individuals clustered within regions. and this structure violates the general assumption of

independence among observations. Multilevel models allow for this type of data

structure. In this paper they analyse individuals stated willingness to pay in an open

ended contingent valuation sun.cq for a reduction in the local l e ~ e l of air pollution in

Sweden. The results suggest that most variations be among individuals. However. our

results indicate that there arc also variations at higher levels. which may be explained by

homogeneous preferences for a reduction in air pollution among individuals living in the

same household or region with a similar level of air pollution. Measuring the welfare

impact of reductions in air pollution using contingent valuation (cv)' surveys has been a

frequently researched area (examples of recent studies are those of Alberini et al. 1997~1,

Carlsson and Johansson Stenman 1999, and Halvorsen 1996). Individuals' willingness to

I For agcncral ovmiew on the CV method see, for exmaplc, Mircl~cll and Carson (1989): and for a critical assssmcnt see Diamond and llausman (1994).

pay (WYP) for a specific reduction in air pollution is strongly related to general health

risks and the impact of the current level of air pollution on the en~ironment.~ '

Air Pollution link with morbidity and mortality from bronchitis in ~ n ~ l a n d , ' the

llnited ~tates?-' ~ a ~ a n , " and other cn~n t r i e s .~ Mortality rates by country boroughs in

England and Wales have been correlated with pollution (as measured by the sulfating

rate, total concentration of solids in the air, a deposit index, and the density of suspended

particulates) and with socioeconomic variables (such as population density and social

class). The smoking habits of the individuals studied have also been investigated. The

conclusion of these studies is that air pollution accounts fbr a doubliilg of the bronchitis

mortality rate for urban, as compared to rural, areas. They took data reported by ~tocks".'

and by ~ s h l e ~ ' and performed a multiple regression analysis.4"

I D.J.B. Mky, Brit. J. Cancer 21. 243 (1967) : C i)aly. Rrit. J. Prrv. Soc. Med. J . 2. 567 (1954): P. Stocks. ibid 1, 74 (1959); R.E. Waller and I'J I.a\\?t~er. ihid 2. 1356 (1955); ibid. 4. 1473 (1957): I'.J. I.a\rthcr, Proc. Roy. Soc. Med. 51, 262 (19%); Nat. Acad. Sci. Nat. Kes. Counc. Publ. No. 652 (1959). pp. 88-96, ~ns$um h c t . 11, 61 1 (1957); J . Pemherton, J . 1l)g. Epidemiol. Microhiol. Immunol. (Praguc) 5 , 189 (1961); J.L. Bum and J. Pmiherton, lnt J . Air M'atcr l'ollut. 7. 5 (1963): E. (;orham. Imcer 1958-1, 691 (1958); P. Stocks, Brit. J. Cancer 14, 397 (1960). Thcse studies are updated and summarized in S.F. Ruck and D.A. Brown, Tabacco Kes ('ounc. I'aper No 7 ( 1963).

2 W. Winkckin, Jr., S. Kantor. I<. W. 1)abis. c.S. Ma~cri, W.E. Moshcr, Arch. Environ. llealth 14, 162 (1967).

I Intcrmiond Joint Commission l1.S. a1111 Canada "Report on Ihc pollution of thc atmosphere in the Detroit Rivu Area" (Washington and Otta\v;~ 1960).

4 T.Toy~ma, Arch. Environ. Health 8. 153 (1963)

5 F.L. Petrilii, G. Agnese. S. Kanitz, ihid. 12. 733 ( I9hO): A. Bell. in Air Pollution by Metallurgical Industries, A. Bell and J.L. Sullivan, Eds. (Departmcrll of I'uhlic I lcalth, Sydne!.. Austrialia, 1962). pp.2: 1-2: 144.

6 P.Stocks, Brit. Med. J. 1.74 (1959) 7 Brit. I. Cancer 14,397 (1960). I D.J.B. Ashlcly, ibid. 21,243 (1967)

David Wheeler (World Bank) gives this information that Air quality monitoring is

routine in high-income countries, but it remains uneven in the developing world. China,

Mexico and Brazil provide notable exceptions. During the past two dccades. thcse three

rapidly industrializing countries have begun monitoring and reporting SPM, PM-10 and other

forms of air pollution in a number of industrial centers. In addition, the have had the top three

shares of foreign direct investment arnong developing countries through out the 1990's.

Chins's average share has been 28%, while the averages for Mexico and Brazil have been 9%

and 7% respecti\lely.

Ostro et al.1996 study describes time series data to examine the association of PM10

and daily mortality between 1989 and 1991 in Santiago. l'he results obtained suggest a strong

association between these two variables even after controlling for several potential

confounden including temperature. season, month and day of the week. However. there have

been few studies completed in Chile on the efkcts of I'M 10 pollution in relation to respiratory

illness in Santiago. In addition, on a worldwide basis. there are only a few epidemiological

studies of the effects of air pollution on the health of children and infants (Duchiade, 1991;

Ixon M, 1992; Woodruff et al., 1997). Studies in the developing world are important because

the extent to which findings from indu5trialixd countries can be cstnpolated to other areas is

uncertain (Ostro, 1992). This study exanincs how weather conditions and air poilution

influence the risk of respiitory diseases among children in Santiago. Data on morbidity due

to respiratory diseases among children under 15 years of age have been collected from a group

of public primary health clinics. In Chile, almost 75% of the populations are member of the

public health care system, which serves prin~arily the lower 70% of the population income

distribution.

Krupnik (2000) estimated the willingness to pay to avoid health damages associated

with air pollution for residents for the Republic of China ('Taiwan) using the model similar to

the one described above. The data used for this study are collected in the course of a

c o m b i i epidenliological study conducted in three cities of Taiwan in 1991 and 1992.

Kaohsiung, and 1 Iualien filled out a diary for 92 days from November 1991 to January 1992,

to record the p r e d a b s e n c e of 19 minor respiratory-related symptoms (chest discomfort,

coughq, wheezing, sore throat, cold flu, and others) and symptoms linked to pollution

exposures (headache and eye irritation) will be recorded. Respondents were also asked about

the severity of these symptoms and about activities undertaken to alleviate symptoms (such as

seeing a doctor) and the related expenditure. The questionnaire also contained questions

designed to detennk actual exposure to outdoor pollution concentrations, such as how much

time the respondent exercised or otherwise spent outdoors on each day. 'I'he diaries data were

matched with pollution and meteorological readings taken at a monitor located within 750

meters h m the respondent's residencc and \+ith infi)rmation about the rcspondents sock

demographic and chronic health conditions. resulting in a panel data- set containing 87.076

observations (953 respondents times 02 dajs). I'articipants ivere selected by random sampling

after stratification by age. The srunple includes both children and adults.

Cmpper estimate the health damages associated with air pollution in developing

countries, policy makers are often forced to extrapolate results from studies conducted in

industrialized countries. These exmpc)lations. however. may be inappropriate for two

reasons. First, it is not clear that the relationship found between pollution and health at the

relatively low levels of pollution experienced in industrialized countries hold for the extren~ely

high pollution levels witnessing in developing countries. Levels of particulate matter, for

instance, are often three to four times higher in developing countries than in industrialized

ones. Second, in developing countries, peoplc die at younger ages and from different cau.es

than in i n d h a l i m i countries, implying that extrapolations of the impacts of air pollution on

mortality may be especially misleading. The average total suspended particulate (TSP) level in

Delhi was 378 micrograms per cubic meter-approximately five times the World ilealth

Organization's (WHO) annual averdgc standard. Bur Cropper made two conclusions from his

study that Firstly; the impact of particulate mattcr on total non-trauma deaths in Deihi is

smaller than effects found in the U.S. Ihis is due to that in Delhi a greater proportion of

deaths occurs at younger ages and from causes not aqsociated with air pollution than is the

case in the U.S. Secondly, the impact of air pollution on death by age group may be very

different in developing countries than in the U.S. In U.S., the impacts occur only above 65

years. But in Delhi impacts occur only ktwecn the age g ~ ~ p 15 to 44.

The health effects of certain air pc~llutants have ken documented in numerous srudies.

(Working Group on Public 1Iealth and Fossil Fuel Consumption (1997): Cropper et al. 1997:

Ostro (1994); Ostro et a1 (1995 and 1996); Schwartz and l)ocker)m (1992): Dockeg and

Pope (1993); and Pope et a1 (1995) and high concentrations of these substances in many

developii countries are known to lead in incrcaccd incidence of illness (morbidity),

especially among individuals suffering from respiratory problems, and to cause premature

death (mortality), These pollutants which give the greatest cause for concern are Carbon

monoxide (CO), Hydrocarbons (IIC), Sulphur oxides (SO?), Nitrogen oxides (NO,),

Particulate Matter (PM) and Lead (Pb). In halable suspended PM, for ex'mple, particularly

parhcles less than 10 microns in size (I'Mlo). can pass through the natural pmtcctive

nechanism of the human respiitory system. 'fie smallest particulates (2 microns or less -

PM 2.5) are created primarily by the combustion of Petroleum fuels. ?he World Bank (1 992)

estimates that reducing SPM to safe levels could reduce premature deaths by 300.000 to

700,000 a year in developiig countries.

The air quality in many cities in developing countries has deteriorated dramatically

over the last feu. decades, and many cfforts are currently being considered to address this

problem. (Stavros Georgiou et al, 1997).

As it was mentioned earlier. literature on MSW is apparently dominated by local

efforts both for policy analysis and also management measures. There exist a number of

studies on MSW management in lndian Cities (Yedla and Parikh. 2001; IJT Bombay.

1997). Yedla and Parikh have tried lo analyze economic feasibility o f exiting and a new

MSW methodology with an improvcd landfill system. Many denlonstrations are recorded

in literature about potential of various decentralized methods of MSU' management viz.

In some cities like Madras a large livestock population contribute to sanitation

and solid waste problems. According to 1989 livestock census, therc were over 30.000

cows and goats and more than 100,000 poultry within Madras city (Appasamy and

Lundquist, 1993). This results in huge colid waste generation and sanitation problems.

One observation about the state of existing knowledge on dcveloping country waste

disposal practices is that virtually no benefit studies exit. That is, costs of collection and

disposal seen to be fairly well investigated. but values involved in the system has not

been completely. Analysing the MSW sector with the perspective of benefits might

change the over all view and would lead to sastainable waste management practices.

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