Measuring the benefits of air quality improvements: A hedonic salary approach

This paper estimates the compensating variation associated with nonmarginal changes in air quality using a hedonic salary model and 1970 data collected for a national sample of university professors. Recent advances in the theory of hedonic prices are utilized in constructing the theoretical model and formulating a procedure for generating empirical estimates. Lower bound estimates of the compensating variation associated with a one standard deviation increase in total suspended particulates (27.6 mgs/cu. meter/24 hours) were $419 for full professors, $234 for associate professors, and $209 for assistant professors in 1970. These results were not sensitive to the specification of the hedonic salary equation.