Does public concern matter to the welfare cost of air pollution? Evidence from Chinese cities

Accurate estimation of the welfare cost of air pollution provides an essential reference for government authorities to formulate air prevention and control actions. Although several attempts have been made on this issue, biases are present in the estimation results due to residents' different concerns and sensitivities to air pollution. By using a panel dataset of major Chinese cities from 2014 to 2018, this study investigates how heterogeneous public concerns contribute to welfare costs of air pollution from a housing market perspective. The Baidu search index was presented as a proxy of public concern about air pollution. Results show that a 1 % increase in air pollutant concentrations leads to a 0.495 % to 0.620 % decrease in housing prices, validating the moderating effect of public concern on the welfare costs of air pollution. Public concern increases residents' willingness to pay for clean air, and this increase is associated with current pollution exposure. The findings suggest that government authorities should consider the variability of residents' willingness to pay and actual pollution levels when developing environmental policies and cost-benefit assessments.