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Valuing Air Pollution’s Impact on Labor Productivity in General Equilibrium

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  • Schreiber, Andrew
  • Maniloff, Peter

Abstract

This paper assesses the welfare implications of air pollution induced labor productivity improvements in a computable general equilibrium framework. We document that labor market productivity changes associated with a one μg/m3 reduction in PM2.5 can have a large welfare impact. Variation in the existing econometric evidence produces a range of possible welfare effects equal to approximately $950-3000 per household per year which is 50-160% of the estimated mortality impacts. Accounting for general equilibrium effects increases the welfare effect by roughly 45% relative to a back of the envelope estimate. Allowing for sector-specific shocks or impacts to leisure preferences have little effect on aggregate results. We also find that the aggregate welfare effect is approximately proportional to the shock size.

Suggested Citation

  • Schreiber, Andrew & Maniloff, Peter, 2025. "Valuing Air Pollution’s Impact on Labor Productivity in General Equilibrium," National Center for Environmental Economics-NCEE Working Papers 368257, United States Environmental Protection Agency (EPA).
    • Handle: RePEc:ags:nceewp:368257
    DOI: 10.22004/ag.econ.368257
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