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Pollution control, worker productivity, and wage inequality

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  • Pengqing Zhang

    (Guangdong University of Foreign Studies)

Abstract

Poor environmental quality can reduce worker productivity, but how this effect is associated with skilled-unskilled wage inequality is still unclear. This paper studies how stricter pollution control impacts wage inequality in the presence of such a worker productivity effect by establishing general equilibrium models with two urban sectors and by conducting empirical analysis with country-level panel data. The models show that when the non-polluting sector is under perfect competition, wage inequality is closely related to the worker productivity effect, while when it is under monopolistic competition, productivity gains of skilled workers from stricter pollution control exhibit complete pass-through. Empirical analysis suggests that the worker productivity effect of pollution control is unskill-biased, which helps mitigate inequality.

Suggested Citation

  • Pengqing Zhang, 2024. "Pollution control, worker productivity, and wage inequality," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 72(4), pages 1105-1128, April.
    • Handle: RePEc:spr:anresc:v:72:y:2024:i:4:d:10.1007_s00168-023-01237-y
    DOI: 10.1007/s00168-023-01237-y
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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