IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp1817.html
   My bibliography  Save this paper

Air pollution and innovation

Author

Listed:
  • Felix Bracht
  • Dennis Verhoeven

Abstract

Existing estimates of the economic costs of air pollution do not account for its effect on inventive output. Using two weather phenomena as instruments, we estimate this effect in a sample of 1,288 European regions. A decrease in exposure to small particulate matter of 0.17µg/m3 - the average yearly reduction in Europe - leads to 1.7% more patented inventions. After ruling out reallocation of human capital, inventor mortality and R&D expenditures as drivers of the effect, we conclude that air pollution's harm to economic output increases by at least 10% when accounting for innovation.

Suggested Citation

  • Felix Bracht & Dennis Verhoeven, 2021. "Air pollution and innovation," CEP Discussion Papers dp1817, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1817
    as

    Download full text from publisher

    File URL: https://cep.lse.ac.uk/pubs/download/dp1817.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hanna, Rema & Oliva, Paulina, 2015. "The effect of pollution on labor supply: Evidence from a natural experiment in Mexico City," Journal of Public Economics, Elsevier, vol. 122(C), pages 68-79.
    2. Eva Arceo & Rema Hanna & Paulina Oliva, 2016. "Does the Effect of Pollution on Infant Mortality Differ Between Developing and Developed Countries? Evidence from Mexico City," Economic Journal, Royal Economic Society, vol. 126(591), pages 257-280, March.
    3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    4. Philippe Aghion & Ufuk Akcigit & Ari Hyytinen & Otto Toivanen, 2017. "The social origins of inventors," CEP Discussion Papers dp1522, Centre for Economic Performance, LSE.
    5. Stephan Heblich & Alex Trew & Yanos Zylberberg, 2021. "East-Side Story: Historical Pollution and Persistent Neighborhood Sorting," Journal of Political Economy, University of Chicago Press, vol. 129(5), pages 1508-1552.
    6. Manuel Trajtenberg, 1990. "A Penny for Your Quotes: Patent Citations and the Value of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 172-187, Spring.
    7. Xuewei Hou & Dongdong Fei & Hanqing Kang & Yinglong Zhang & Jinhui Gao, 2018. "Seasonal statistical analysis of the impact of meteorological factors on fine particle pollution in China in 2013–2017," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 93(2), pages 677-698, September.
    8. Avraham Ebenstein & Victor Lavy & Sefi Roth, 2016. "The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution," American Economic Journal: Applied Economics, American Economic Association, vol. 8(4), pages 36-65, October.
    9. Bronwyn H. Hall & Adam Jaffe & Manuel Trajtenberg, 2005. "Market Value and Patent Citations," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 16-38, Spring.
    10. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
    11. repec:fth:harver:1473 is not listed on IDEAS
    12. Tom Y. Chang & Joshua Graff Zivin & Tal Gross & Matthew Neidell, 2019. "The Effect of Pollution on Worker Productivity: Evidence from Call Center Workers in China," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 151-172, January.
    13. Benjamin F. Jones & Lawrence H. Summers, 2020. "A Calculation of the Social Returns to Innovation," NBER Chapters, in: Innovation and Public Policy, pages 13-59, National Bureau of Economic Research, Inc.
    14. Florian Seliger & Gaéran de Rassenfosse & Jan Kozak, 2019. "Geocoding of worldwide patent data," KOF Working papers 19-458, KOF Swiss Economic Institute, ETH Zurich.
    15. Leonid Kogan & Dimitris Papanikolaou & Amit Seru & Noah Stoffman, 2017. "Technological Innovation, Resource Allocation, and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 665-712.
    16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    17. William D. Nordhaus, 2004. "Schumpeterian Profits in the American Economy: Theory and Measurement," NBER Working Papers 10433, National Bureau of Economic Research, Inc.
    18. Joshua Graff Zivin & Matthew Neidell, 2012. "The Impact of Pollution on Worker Productivity," American Economic Review, American Economic Association, vol. 102(7), pages 3652-3673, December.
    19. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1033-1082, Elsevier.
    20. La Nauze, Andrea & Severnini, Edson R., 2021. "Air Pollution and Adult Cognition: Evidence from Brain Training," IZA Discussion Papers 14353, Institute of Labor Economics (IZA).
    21. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2001. "The NBER Patent Citation Data File: Lessons, Insights and Methodological Tools," NBER Working Papers 8498, National Bureau of Economic Research, Inc.
    22. Stafford, Tess M., 2015. "Indoor air quality and academic performance," Journal of Environmental Economics and Management, Elsevier, vol. 70(C), pages 34-50.
    23. Gaurav Khanna & Wenquan Liang & Ahmed Mushfiq Mobarak & Ran Song, 2021. "The Productivity Consequences of Pollution-Induced Migration in China," NBER Working Papers 28401, National Bureau of Economic Research, Inc.
    24. Tom Chang & Joshua Graff Zivin & Tal Gross & Matthew Neidell, 2016. "Particulate Pollution and the Productivity of Pear Packers," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 141-169, August.
    25. Aragón, Fernando M. & Miranda, Juan Jose & Oliva, Paulina, 2017. "Particulate matter and labor supply: The role of caregiving and non-linearities," Journal of Environmental Economics and Management, Elsevier, vol. 86(C), pages 295-309.
    26. Siluo Yang & Dietmar Wolfram & Feifei Wang, 2017. "The relationship between the author byline and contribution lists: a comparison of three general medical journals," Scientometrics, Springer;Akadémiai Kiadó, vol. 110(3), pages 1273-1296, March.
    27. Künn, Steffen & Palacios, Juan & Pestel, Nico, 2019. "Indoor Air Quality and Cognitive Performance," IZA Discussion Papers 12632, Institute of Labor Economics (IZA).
    28. Harhoff, Dietmar & Gambardella, Alfonso & Verspagen, Bart, 2008. "The Value of European Patents," CEPR Discussion Papers 6848, C.E.P.R. Discussion Papers.
    29. Wooldridge, Jeffrey M., 1999. "Distribution-free estimation of some nonlinear panel data models," Journal of Econometrics, Elsevier, vol. 90(1), pages 77-97, May.
    30. James Archsmith & Anthony Heyes & Soodeh Saberian, 2018. "Air Quality and Error Quantity: Pollution and Performance in a High-Skilled, Quality-Focused Occupation," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 827-863.
    31. Alex Bell & Raj Chetty & Xavier Jaravel & Neviana Petkova & John Van Reenen, 2019. "Who Becomes an Inventor in America? The Importance of Exposure to Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 647-713.
    32. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
    33. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    34. Bronwyn H. Hall & Nathan Rosenberg (ed.), 2010. "Handbook of the Economics of Innovation," Handbook of the Economics of Innovation, Elsevier, edition 1, volume 1, number 1.
    35. Antoine Dechezleprêtre & Nicholas Rivers & Balazs Stadler, 2019. "The economic cost of air pollution: Evidence from Europe," OECD Economics Department Working Papers 1584, OECD Publishing.
    36. Jiaxiu He & Haoming Liu & Alberto Salvo, 2019. "Severe Air Pollution and Labor Productivity: Evidence from Industrial Towns in China," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 173-201, January.
    37. F. M. Scherer, 1965. "Corporate Inventive Output, Profits, and Growth," Journal of Political Economy, University of Chicago Press, vol. 73, pages 290-290.
    38. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
    39. Zacchia, Paolo, 2018. "Benefiting colleagues but not the city: Localized effects from the relocation of superstar inventors," Research Policy, Elsevier, vol. 47(5), pages 992-1005.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clara Kögel, 2022. "The impact of air pollution on labour productivity in France," Documents de travail du Centre d'Economie de la Sorbonne 22020, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Clara Kögel, 2022. "The impact of air pollution on labour productivity in France," Documents de travail du Centre d'Economie de la Sorbonne 22020, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Ron Chan & Martino Pelli & Veronica Vienne, 2023. "Air Pollution, Smoky Days and Hours Worked," CIRANO Working Papers 2023s-15, CIRANO.
    3. Shihe Fu & V. Brian Viard, 2022. "A mayors perspective on tackling air pollution," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 16, pages 413-437, Edward Elgar Publishing.
    4. Alex Bell & Raj Chetty & Xavier Jaravel & Neviana Petkova & John Van Reenen, 2019. "Who Becomes an Inventor in America? The Importance of Exposure to Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 647-713.
    5. Bell, Alex & Chetty, Raj & Jaravel, Xavier & Petkova, Neviana & Van Reenen, John, 2019. "Do tax cuts produce more Einsteins? The impacts of financial incentives vs. exposure to innovation on the supply of inventors," LSE Research Online Documents on Economics 121796, London School of Economics and Political Science, LSE Library.
    6. Michelle Marcus, 2021. "Pollution at schools and children's aerobic capacity," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3016-3031, December.
    7. Felix Holub & Laura Hospido & Ulrich J. Wagner, 2020. "Urban air pollution and sick leaves: evidence from social security data," Working Papers 2041, Banco de España.
    8. Moritz A. Drupp & Ulrike Kornek & Jasper N. Meya & Lutz Sager, 2021. "Inequality and the Environment: The Economics of a Two-Headed Hydra," CESifo Working Paper Series 9447, CESifo.
    9. Bellani, Luna & Ceolotto, Stefano & Elsner, Benjamin & Pestel, Nico, 2021. "Air Pollution Affects Decision-Making: Evidence from the Ballot Box," IZA Discussion Papers 14718, Institute of Labor Economics (IZA).
    10. Graff Zivin, Joshua & Liu, Tong & Song, Yingquan & Tang, Qu & Zhang, Peng, 2020. "The unintended impacts of agricultural fires: Human capital in China," Journal of Development Economics, Elsevier, vol. 147(C).
    11. Zhenyu Yao & Wei Zhang & Xinde Ji & Weizhe Weng, 2023. "Short-Term Exposure to Air Pollution and Cognitive Performance: New Evidence from China’s College English Test," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 211-237, May.
    12. Choi, Mincheol & Lee, Chang-Yang, 2021. "Technological diversification and R&D productivity: The moderating effects of knowledge spillovers and core-technology competence," Technovation, Elsevier, vol. 104(C).
    13. Bridget Hoffmann & Juan Pablo Rud, 2022. "Exposure or Income? The Unequal Effects of Pollution on Daily Labor Supply," Working Papers 109, Red Nacional de Investigadores en Economía (RedNIE).
    14. Petra Moser & Joerg Ohmstedt & Paul M. Rhode, 2016. "Patent Citations - An Analysis of Quality Differences and Citing Practices in Hybrid Corn," Working Papers 16-05, New York University, Leonard N. Stern School of Business, Department of Economics.
    15. Liu, Haoming & Salvo, Alberto, 2017. "Severe Air Pollution and School Absences: Longitudinal Data on Expatriates in North China," IZA Discussion Papers 11134, Institute of Labor Economics (IZA).
    16. Yao, Yao & Li, Xue & Smyth, Russell & Zhang, Lin, 2022. "Air pollution and political trust in local government: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    17. Petra Moser & Joerg Ohmstedt & Paul W. Rhode, 2015. "Patent Citations and the Size of the Inventive Step - Evidence from Hybrid Corn," NBER Working Papers 21443, National Bureau of Economic Research, Inc.
    18. Damini Singh & Indrani Gupta & Sagnik Dey, 2022. "Effect of Air Pollution on Cognitive Performance in India," IEG Working Papers 452, Institute of Economic Growth.
    19. Borgschulte, Mark & Molitor, David & Zou, Eric Yongchen, 2022. "Air Pollution and the Labor Market: Evidence from Wildfire Smoke," IZA Discussion Papers 15373, Institute of Labor Economics (IZA).
    20. W Walker Hanlon, 2020. "Coal Smoke, City Growth, and the Costs of the Industrial Revolution," The Economic Journal, Royal Economic Society, vol. 130(626), pages 462-488.

    More about this item

    Keywords

    air pollution; air quality; innovation; patent; productivity;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp1817. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://cep.lse.ac.uk/_new/publications/discussion-papers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.