Severe Air Pollution and Labor Productivity: Evidence from Industrial Towns in China
62 Pages Posted: 21 Mar 2015 Last revised: 5 Nov 2017
Date Written: September 11, 2017
We examine day-to-day fluctuations in worker-level output at two manufacturing sites in China. Ambient fine-particle (PM2.5) pollution is severe but significantly variable, largely due to exogenously shifting atmospheric ventilation conditions including temperature-altitude gradients and surface wind. Across sites and identifying assumptions, and correcting for worker heterogeneity and seasonality, we obtain an insignificant immediate output response from concurrent (same-shift) variation in particle pollution. This is consistent with managers' stated perceptions during our visits to one dozen firms in four provinces. We then follow the epidemiological literature and allow worker outcomes to respond to day-to-day variation in pollution with up to 30 days of delay. We uncover statistically significant adverse output effects from more prolonged pollution exposure, but these effects are not large. The cumulative effect---scaled for a large 10 ug/m3 PM2.5 variation in exposure on the day of output and on each of the previous 25 days---amounts to about -1% of mean daily output.
Keywords: Air pollution, acute exposure, labor productivity, labor supply, heterogeneous effects, thermal inversions, wind, PM2.5, SO2, environmental damage, environmental valuation, air pollutants/adverse effects, distributed lags, instrumental variables
JEL Classification: J24, Q51, Q52, Q53, O44, R11
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