Population aging and environmental preferences in OECD countries: The case of air pollution

Most industrialized countries will experience a significant aging of their populations in the future. The consequences of this coming population aging for environmental preferences and environmental quality are ambiguous. This paper uses data on life satisfaction to investigate how preferences and willingness to pay for air quality depend on the age composition of the population. Our estimation results on a panel of 25 OECD countries, spanning the period from 1990 to 2004, indicate that preferences for air quality are U-shaped in age, consistent with epidemiological evidence on the age-specific health consequences of air pollution. We find the projected future evolution of the aging process in OECD over the next two decades to imply a rise to the three-fold in the marginal willingness to pay for reduced air pollution.