Three essays on the economics of water pollution control




Zheng, Jiameng

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Water pollution poses important challenges worldwide. In developed countries, most of the challenges from water pollution have to do with recreational and amenity use of water, as well as the negative impact on ecosystems. For instance, in the United States, dead zones caused by nutrient pollution occur annually in many major coastal waters, including Tampa Bay, the Gulf of Mexico, Chesapeake Bay, and coastal North Carolina, causing large welfare effects in these regions. In developed countries like the United States, the aging drinking water infrastructure, such as the presence of lead pipes, is also a threat to human health. In developing countries, water pollution has a pronounced impact on human health given that safe drinking water is limited in many areas.

Economic analysis plays a critical role in the making of environmental policy. In designing and assessing a water pollution control policy, it is important to understand the costs and benefits of such policies and be able to empirically evaluate their effectiveness. However, there are still important challenges in understanding the costs and benefits of water pollution control policies. Water quality improvement is a non-market good, so no direct price signal is available for valuing it. To overcome this problem, economists have developed several non-market valuation techniques, such as hedonic property models and recreation demand models. Each valuation method only captures a piece of the price consumers are willing to pay to improve water quality.

This dissertation comprises three papers that answer some critical questions on the economic analysis of water pollution policies. In the first paper, I estimate the marginal willingness-to-pay of homeowners for water quality improvement in Florida,using a two-stage model that combines the recreational value and amenity value of both local and regional water quality improvement. This paper, which focuses on nutrient pollution problems related to the dead zones discussed earlier, generates a more comprehensive estimate of the benefits of water pollution reduction than that used in prior work. In the second paper, I estimate an important cost of water pollution by investigating the short-run and long-run educational impacts of lead pollution in drinking water. Using data from Texas, I find that drinking water lead exposure at birth has a significant negative impact on both 3rd-grade standardized test scores and the high school graduation rate. While many prior papers in environmental economics quantify short-run and long-run human capital costs of air pollution, this paper is one of only a few to do so for an important water pollution problem. Switching to the third paper, I examine the existing literature on the policy instruments that can be used to reduce water pollution. With a focus on developing countries, I describe the empirical evidence on the effectiveness of various water pollution control policies, identify the challenges for implementing and assessing such policies, and provide recommendations for future research.



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