Brain Drain: The Impact of Air Pollution on Firm Performance

72 Pages Posted: 5 Dec 2019 Last revised: 13 Sep 2021

See all articles by Shuyu Xue

Shuyu Xue

Southwestern University of Finance and Economics (SWUFE)

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Xiaofeng Zhao

Lingnan University - Department of Finance and Insurance

Date Written: September 9, 2020

Abstract

Air pollution is a growing hazard to human health. This study examines whether air pollution affects the formation of corporate human capital and thereby firm performance. We find that people exhibit an intention to look for jobs in less polluted areas when air pollution is high in their location. This suggests that individuals arrange their lives at least partially in response to air pollution. Consistent with this hypothesis, we find that the level of skilled executives and employees at a firm drops significantly when information on pollution in the firm’s location is accessible in real time and when the pollution level in the firm’s location increases, especially in locations where air pollution poses greater health concerns. In addition, parallel reductions in firm productivity and value are found and become more salient when firms have a greater dependence on human capital.

Keywords: Air pollution, Brain Drain, Human Capital, Firm Performance, China

JEL Classification: O3, Q5, J3

Suggested Citation

Xue, Shuyu and Zhang, Bohui and Zhao, Xiaofeng, Brain Drain: The Impact of Air Pollution on Firm Performance (September 9, 2020). Journal of Environmental Economics and Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3490344 or http://dx.doi.org/10.2139/ssrn.3490344

Shuyu Xue

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen ( email )

Xiaofeng Zhao (Contact Author)

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Rd
Tuen Mun
Hong Kong

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