The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City

Abstract

Moderate effects of pollution on health may exert an important influence on labor market decisions. We exploit exogenous variation in pollution due to the closure of a large refinery in Mexico City to understand how pollution impacts labor supply. The closure led to an 8 percent decline in pollution in the surrounding neighborhoods. We find that a one percent increase in sulfur dioxide results in a 0.61 percent decrease in the hours worked. The effects do not appear to be driven by labor demand shocks nor differential migration as a result of the closure in the areas located near the refinery. AbstractModerate eects of pollution on health may exert an important inuence on labor market decisions. We exploit exogenous variation in pollution due to the closure of a large renery in Mexico City to understand how pollution impacts labor supply. The closure led to an 8 percent decline in pollution in the surrounding neighborhoods. We nd that a one percent increase in sulfur dioxide results in a 0.61 percent decrease in the hours worked. The eects do not appear to be driven by labor demand shocks nor dierential migration as a result of the closure in the areas located near the renery.

Polluting Industries and Agricultural Productivity: Evidence from Mining in Ghana

“…These effects are cumulative and long-lived. 15 Finally, recent studies find evidence of a negative impact of air pollution on labour supply and productivity (Hanna and Oliva, 2011;Graff Zivin and Neidell, 2012), mostly due to its effect on human health.…”

“…The economic literature has paid little attention to this channel, despite the existing biological evidence linking pollution to reductions in crop health and yields (Heck et al, 1982;Miller, 1988;Marshall et al, 1997). Instead, it has mostly focused on the effect of pollution on human health 5 and, more recently, on human capital accumulation (Currie et al, 2009), labour supply (Hanna and Oliva, 2011) and labour productivity (Graff Zivin and Neidell, 2013). Quantifying this externality is important to inform the debate on environmental policies and to assess the net benefits of (potentially) polluting activities, such as urban growth and extractive industries, which may occur in the vicinity of agricultural areas.…”

Pollution and infectious diseases

“…Recent empirical contributions highlight the negative effect of pollution on labor supply (Carson et al 2011;Graff Zivin and Neidell 2014;Hanna and Oliva 2015). By studying a database on industrial activities in Mexico City, Hanna and Oliva (2015) find that a 1 percent increase in air pollution reduces the number of worked hours by 0.61 percent.…”

“…Recent empirical contributions highlight the negative effect of pollution on labor supply (Carson et al 2011;Graff Zivin and Neidell 2014;Hanna and Oliva 2015). By studying a database on industrial activities in Mexico City, Hanna and Oliva (2015) find that a 1 percent increase in air pollution reduces the number of worked hours by 0.61 percent. On theoretical grounds, two mechanisms contribute to explaining this negative impact: first, an incentive effect through which pollution affects people's work-leisure trade-off by deteriorating their working conditions (Bosi et al 2015); and second, a health effect, through which pollution weakens agents' immune systems and increases the likelihood of epidemic outbreaks (Caren 1981).…”

Pollution effects on labor supply and growth

“…Recent empirical studies have documented significant impacts of pollution on labor supply, in its extensive margin, hours worked (Graff, Zivin, and Neidell 2010;Carson, Koundouri, and Nauges 2011;Hanna and Oliva 2011), and also in its intensive margin, labor productivity (Schlenker and Walker 2011;Graff Zivin and Neidell 2012). There is nowadays a consensus on the negative impacts of pollution on labor productivity because of the negative effect on human capital and, in particular, on health.…”