ANALYSISDoes clean air matter in developing countries' megacities? A hedonic price analysis of the Jakarta housing market, Indonesia

Despite numerous hedonic studies on the value of clean air in developed countries, the lack of similar studies in less developed countries has raised the question as to whether clean air also matters in developing countries' megacities. As an attempt to fill this gap, we apply a hedonic property value analysis, the method commonly used to infer the value of clean air in developed countries, using the combination of data on housing rental prices and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result indicates that, in the cases of lead, total hydro carbon (THC), and SO2, air pollutants have a negative association with property value; i.e., housing rental price. The relationship is at 5% level of significance for lead and 10% level for THC and SO2. This paper estimates that per family value of clean air in Jakarta ranges from US$28 to US$85 per μg/m3.