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Air Pollution and Manufacturing Firm Productivity: Nationwide Estimates for China
[Management and shocks to worker productivity]

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Listed:
  • Shihe Fu
  • V Brian Viard
  • Peng Zhang

Abstract

We provide nationwide causal estimates of air pollution's effect on short-run productivity for China's manufacturing sector from 1998 to 2007. Using thermal inversions as an instrument, a 1 µg/m3 decrease in PM2.5 increases productivity by 0.82% (elasticity of −0.44). Increased hiring attenuates the elasticity to −0.17. Differential effects of a trade shock on coastal versus inner regions imply a pollution elasticity of output of 1.43. Simulating a dynamic general-equilibrium model yields an output elasticity of −0.28 with respect to PM2.5. An exogenous 1% decrease in PM2.5 nationwide increases gross domestic product by 0.039%.

Suggested Citation

  • Shihe Fu & V Brian Viard & Peng Zhang, 2021. "Air Pollution and Manufacturing Firm Productivity: Nationwide Estimates for China [Management and shocks to worker productivity]," The Economic Journal, Royal Economic Society, vol. 131(640), pages 3241-3273.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:640:p:3241-3273.
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    File URL: http://hdl.handle.net/10.1093/ej/ueab033
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