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Economic valuation of health and wellness improvements: Implications for human wellbeing in the built environment
Max A. Pollinger
†Department
of Economics, Colby College
Introduction
Non-market valuation techniques
are usually used for:
Cost-benefit analysis of policies
NRDA for litigation (e.g. Exxon Valdez)
This study explores how choice-experiment valuation can
inform health and wellness industry representatives on
ideal target markets for improvements
The market for health and wellness will improve as
consumer become more educated on the wide range of
hazards in the built environment
Research Questions
Question 1:
How do individuals willingness to pay for health and
wellness differ by the type of improvements?
Question 2:
Do individuals consider health an inelastic good?
Methodology
Choice Experiment Surveys:
Background
Health and Wellness Real Estate
We spend 90% of our times indoors yet most research in
the housing industry has been focused on improving energy
efficiency while little research has been done on health and
wellness
Air: poor indoor air quality results in $150 billion of illnessrelated economic costs
Water: Millions of Americans regularly drink tap water that
is contaminated with toxic and cancer-causing chemicals
such as lead, trihalomethanes, arsenic and pesticides
Bacteria: Super bugs such as MRSA have become resistant
to traditional surface disinfectants. New non-leaching
antimicrobial agents are needed to fight new strains of
bacteria
Sleep Quality: Reducing light pollution at night in the
indoor environment can minimize disruptions to the body’s
circadian system while sleeping and increase alternativeness
during the day
WELL Building Standard: First protocol of its kind that
focuses on improving human wellness within the built
environment by identifying specific conditions, that when
integrated into building interiors, enhance the health and
wellbeing of the occupants
By introducing features for each
of the seven concepts, this
standard takes a holistic
approach to addresses the
multiplicity of elements in the
environment that impact human
health and wellbeing
Question 2:
What demographic characteristics influence
individuals willingness to pay for health and
wellness?
Sample Questionnaire:
Identified attributes through expert
consultation
Final list of attributes:
Indoor Air Quality
Water Quality
Bacteria Reduction
Sleep Quality
Cost
$35,000$50,000
17%
$25,000$34,000
16%
WTP
WTP: Exercise
WTP: Energy
efficiency
improvements
Air Quality
2248.9***
(372.4)
2257.5***
(473.9)
2262.3***
(542.1)
Water
Quality
3612.3***
(472.2)
3618.8***
(601.2)
3841.2***
(707.3)
Bacteria
Reduction
189.5***
(20.51)
194.5***
(26.77)
196.9***
(30.48)
Sleep Quality
1252.4***
(245.2)
1362.0***
(324.9)
1515.2***
(371.3)
Conclusions
An orthogonal fractional factorial
design
Includes the interaction of attributes
The Survey Administration:
The survey instrument:
Background Information
Seven choice questions
Demographic question examples:
Do you regularly exercise?
Have you improved your home to
be more energy efficient?
Do you suffer from allergies
Random sample of U.S. residents
259 responses respondents paid $0.25 each on Amazon
Turk
199 surveys analyzed after eliminating individuals who
answered question 1 and 7 differently (these two
questions were the same)
The Specification:
A conditional logit model
Results
Full Regression (MMNL):
Attribute
Air Quality
Conditional Logit
0.621***
(0.0552)
Willingness to Pay
2322.9***
(344.3)
Water Quality
0.929***
(0.0571)
0.0502***
(0.00263)
0.350***
(0.0532)
0.000267***
(0.0000281)
4620
3475.9***
(421.8)
Observations
$50,000$74,999
20%
Standard errors in parentheses
* p < 0.05, ** p < 0.01, *** p < 0.001
Experimental design:
Cost
Less than
$25,000
27%
Individuals with higher income may be less likely to pay for
health and wellness improvements because they believe
their home already exhibits high levels of the attributes
used in the study
Attribute
The Survey Instrument:
Sleep Quality
All attributes were significant
factors when choosing whether
or not to invest in health and
wellness improvements
$75,000$99,999
10%
First study to statistically show
that individuals who exercise value
health and wellness improvements
more than non-active individuals
Stated preference valuation tool to find
WTP for environmental goods
Use responses to estimate values of
individual features of a good
Bacteria Reduction
Discussion
Greater
than Figure 1: Income Distribution
$100,000
10%
Standard errors in parentheses
* p < 0.05, ** p < 0.01, *** p < 0.001
187.8***
(18.66)
1310.7***
(234.3)
While certain air filtration systems can reach upwards of
$2000 and whole-house water purification systems can
range anywhere from $400-$3,000, this study shows that
there is room for both cost leadership and product
differentiation within this industry and that individuals will
invest in their health independent of their income bracket.
While new antimicrobial agents cost more than traditional
cleaning disinfectants, consumers are WTP $187 for a 1%
reduction in bacteria
This demonstrates the industry growth
potential of non-toxic anti-microbial coatings
such as titanium dioxide which utilize light
induced photocatalytic oxidation to kill
microbes
Individuals are willing to pay over $1000 more for clean
drinking water vs. high air quality. It is possible that
individuals are well educated on water purification systems
and understand the benefits of ensuring
water is free of contaminants.
Acknowledgments
Thanks to Sahan Dissanayake for the guidance on conducting a choice experiment
and for providing funds to collect survey responses from Amazon Turk
4620
Thanks to Delos Living for providing me with a building standard to base my
attribute list on