Air Pollution, Traffic, and Retail Business

72 Pages Posted: 12 Jul 2021 Last revised: 7 Sep 2021

See all articles by Xiaoou Liu

Xiaoou Liu

Renmin University of China

Tauhidur Rahman

University of Arizona - Department of Agricultural and Resource Economics

Xiangrui Wang

Renmin University of China - School of Agricultural Economics and Rural Development

Date Written: June 1, 2021

Abstract

We study the effects of air pollution on business performance of a retail industry: restaurants. Using contemporaneous data, we link the business outcomes of a chain restaurants in Beijing to traffic and pollution in their surroundings. Air pollution has adverse effects on restaurant revenue, both dining-in and home-delivery business, and their extensive and intensive margins. Pollution-induced change in local traffic, a proxy for customer flow, is a mechanism of the effects. This is validated further by our result that pollution affects restaurants only during the weekends, when people can choose to stay indoors to avoid pollution, which is a costly option during the weekdays since people have outdoor obligations. We highlight a new dimension of the costs of air pollution by documenting its adverse effects on a traditional retail industry.

Keywords: Air pollution, traffic flow, business performance, retail industry

JEL Classification: E32, I18, L66, Q51, Q53, R11, R41

Suggested Citation

Liu, Xiaoou and Rahman, Tauhidur and Wang, Xiangrui, Air Pollution, Traffic, and Retail Business (June 1, 2021). Available at SSRN: https://ssrn.com/abstract=3882176 or http://dx.doi.org/10.2139/ssrn.3882176

Xiaoou Liu

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Tauhidur Rahman

University of Arizona - Department of Agricultural and Resource Economics ( email )

P. O. Box 210023
Tucson, AZ 85721-0023
United States
(520) 621-8657 (Phone)
(520) 621-6250 (Fax)

Xiangrui Wang (Contact Author)

Renmin University of China - School of Agricultural Economics and Rural Development ( email )

59 Zhongguancun Street
Beijing 100872
China

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