Bounds, Benefits, and Bad Air: Net Benefits of Pollution Alerts

Abstract Though air-quality alert systems (AQAS) cover more than 1.7 billion people worldwide, there has been little analysis of the net benefits of these systems. This paper presents a theoretical framework for deriving lower bounds on the net benefits of an AQAS and applies it to a South Korean system currently covering over 51 million people. Estimating a regression discontinuity design, we find that an alert issuance reduced youth respiratory expenditures by 30% and adult cardiovascular expenditures by 23%. The overall system reduced externalised health expenditures by 28.6 million dollars during 2016−2017, with a minimum benefit-cost ratio of 7.1:1. Including dynamic impacts of alerts increases the minimum benefits (benefit-cost ratio) to 36.7 million dollars (9.2:1). Our findings imply that the AQAS generates significant net benefits and suggests that manipulation of air quality data, which has been observed in other contexts, may negatively impact social net benefits.