The Impact of Air Pollution on Labor Supply in China
36 Pages Posted: 8 Jan 2022 Last revised: 8 Apr 2022
A growing literature demonstrates that air pollution has negative impacts on human health, cognitive ability, and labor productivity, but little is known about the effect of chronic air pollution on labor supply decisions. We use restricted-access individual-level panel data from the China Family Panel Survey (CFPS), paired with sub-district level remote-sensing estimates of air pollution, to evaluate the impact of chronic exposure to fine particulate matter PM2.5 on an individual's hours worked. We exploit within-individual changes in air pollution, and fixed effects estimates indicate that an increase of 1 μg/m3 in PM2.5 reduces an individual's average hours worked by about 14 minutes per week. We then leverage the staggered, city-level roll-out of air pollution monitoring and information provision to test hypotheses about the underlying mechanisms. We show that individuals with poor health are the most responsive to changes in PM2.5. For individuals who are environmentally 'unaware', this effect is mostly through an impact of pollution on health, while individuals who claim to be 'environmentally-aware' engage in avoidance behavior. Finally, the roll-out of monitoring and information provision at the city level plays an important role in raising awareness and individuals' responsiveness to pollution.
Keywords: Air pollution, pollution awareness, labor supply, hours worked, China
Suggested Citation: Suggested Citation