Air Pollution, Outdoor Activities, and Small Business

66 Pages Posted: 12 Jul 2021 Last revised: 6 Jul 2022

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

Air pollution may harm businesses that rely on the physical traffic of customers. We exploit distribution of air pollution in the surroundings of a traditional small business, restaurants, to estimate its effect on their business performance. Using data on three groups of chain restaurants in Beijing, we show that pollution reduces their revenues on the weekends, when most people can choose to stay indoor to avoid pollution, and this effect is accounted mainly by the corresponding effects on extensive margins. Pollution-induced change in local outdoor activities is a mechanism. Home-delivery revenue cannot offset the pollution-induced loss in the dining-in revenue.

Keywords: Air pollution, traffic flow, business performance, small business

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

Suggested Citation

Liu, Xiaoou and Rahman, Tauhidur and Wang, Xiangrui, Air Pollution, Outdoor Activities, and Small 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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