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

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  • Rema Hanna
  • Paulina Oliva

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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17302.

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Date of creation: Aug 2011
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Handle: RePEc:nbr:nberwo:17302

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  1. Crocker, Thomas D & Horst, Robert L, Jr, 1981. "Hours of Work, Labor Productivity, and Environmental Conditions: A Case Study," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 361-68, August.
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  3. West, Sarah E. & Williams III, Roberton C., 2007. "Optimal taxation and cross-price effects on labor supply: Estimates of the optimal gas tax," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 593-617, April.
  4. Eva O. Arceo Gómez & Raymundo M. Campos-Vázquez, 2010. "Labor supply of married women in Mexico: 1990-2000," Serie documentos de trabajo del Centro de Estudios Económicos 2010-16, El Colegio de México, Centro de Estudios Económicos.
  5. W. Reed Walker, 2013. "The Transitional Costs of Sectoral Reallocation: Evidence From the Clean Air Act and the Workforce," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1787-1835.
  6. Seema Jayachandran, 2009. "Air Quality and Early-Life Mortality: Evidence from Indonesia’s Wildfires," Journal of Human Resources, University of Wisconsin Press, vol. 44(4).
  7. Kenneth Y. Chay & Michael Greenstone, 1999. "The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession," NBER Working Papers 7442, National Bureau of Economic Research, Inc.
  8. Lucas W. Davis, 2008. "The Effect of Driving Restrictions on Air Quality in Mexico City," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 38-81, 02.
  9. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
  10. Jesse Schwartz & Robert Repetto, 2000. "Nonseparable Utility and the Double Dividend Debate: Reconsidering the Tax-Interaction Effect," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(2), pages 149-157, February.
  11. Williams III, Roberton C., 2003. "Health effects and optimal environmental taxes," Journal of Public Economics, Elsevier, vol. 87(2), pages 323-335, February.
  12. Bovenberg, A. Lans & Goulder, Lawrence H., 1997. "Costs of Environmentally Motivated Taxes in the Presence of Other Taxes: General Equilibrium Analyses," National Tax Journal, National Tax Association, vol. 50(1), pages 59-88, March.
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