Investigating the impact of air pollution on housing prices in Tehran using the Hadonic model

Valuation of environmental goods will give planners a clear view of policy makers and explanation for the prformance of economic plans, and will allow policy makers to better analyze projects, as well as compare and select the best and least expensive projects.The Hedonic pricing method has been used by economists for non-marketable goods to estimate the value of these goods by estimating the impact of these goods on the asset market, especially housing market. The main purpose of this study is to estimate the value of clean air and the willingness to pay to improve air quality and extract its demand function in the metropolis of Tehran.In this research, using the data of transactions in the housing market of Tehran, in the period of 2016 and three categories of structural features, neighborhood and environment, we have estimated the price function of Hedonic in Tehran. 7000 samples of real transactions were collected by simple random sampling from 22 districts of Tehran. The Hedonic price function is extracted based on two-stage Rosen method and two-way logarithmic functional form. Using the implicit price, the marginal willingness to pay for each air pollution variable is estimated, then demand function is extracted using the socio-economic characteristics of individuals.The results show that air pollution variables such as O3, SO2, PM10, PM2.5 have a negative and significant effect on assets. Income elasticity illustrates the need for clean air for citizens. Also, the variables of income, age and marriage status and education level of buyers of residential units are influential in choosing a living environment with less pollution.