The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City
58 Pages Posted: 29 Aug 2011 Last revised: 1 Sep 2013
Date Written: August 2011
Moderate effects of pollution on health may exert an important influence on labor market decisions. We exploit exogenous variation in pollution due to the closure of a large refinery in Mexico City to understand how pollution impacts labor supply. The closure led to an 8 percent decline in pollution in the surrounding neighborhoods. We find that a one percent increase in sulfur dioxide results in a 0.61 percent decrease in the hours worked. The effects do not appear to be driven by labor demand shocks nor differential migration as a result of the closure in the areas located near the refinery.
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