Spatial implications of endogenous pollution externalities in a residential location model

Exposure to traffic-induced air pollution is acknowledged to cause harmful effects on the environment and human health. Citizens are increasingly concerned as reflected in the willingness of citizens to pay for living in less polluted urban environments. Air quality is an amenity progressively considered in location choice . While residents might seek to remove oneself from traffic as source of emissions and favour low density environments, urban planners often argue towards urban densification in order to limit the generation of emissions by reducing distances between activities and, thus, distances travelled . The potential ease of citizens’ satisfaction in such densified areas with reduced green space amenities and concentration of development and traffic is, however, often omitted . This contradiction triggers the debate about the role of urban structure and, in particular, residential preferences on mitigating not only environmental, but also health and social impacts caused by urban air pollution.
To shed further light on this debate, we contribute a spatial economics model focussing on residential choice and explicitly including traffic-induced exposure to air pollution as residential disamenity. Economic literature introducing air pollution on an urban scale into economic models to assess its impact on urban structure comprises equilibrium models with aggregate pollution from industrial sources ; however, only few with (disaggregate) pollution from transport and an explicit treatment of space . A general link between environmental and traffic congestion externalities has been mathematically formalized but not yet explicitly so in the context of residential exposure. This research builds on the standard urban economics model and explicitly formulates exposure disamenities in residents’ utility perception.
The paper focuses on deriving analytical properties from the model with pollution exposure from traffic, while the literature is predominantly numerical so far. Analytical comparative statics grant insights into spatial implications, residents’ utility and health impacts. Thereby, also the impact of, for instance, environmental awareness, technological improvements and the severity of health damage are analysed. Despite vast critiques on sprawl, with regard to air pollution dispersed urban structures resulting from exposure aversion might yet reflect beneficial trade-offs between commuting distance and prevention of exposure; thus, between environmental and social concerns.