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Exposure or Income? The Unequal Effects of Pollution on Daily Labor Supply

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  • Hoffmann, Bridget
  • Rud, Juan Pablo

Abstract

We use high-frequency data on fine particulate matter air pollution (PM 2.5) at the locality level to study the effects of high pollution on labor supply decisions and hospitalizations for respiratory disease in the metropolitan area of Mexico City. We document a negative, non-linear relationship between PM 2.5 and same-day labor supply, with strong effects on days with extremely high pollution levels. On these days, the average worker experiences a reduction of around 7.5% of working hours. Workers partially compensate for lost hours by increasing their labor supply on days that follow high-pollution days. Informal workers reduce their labor supply less than formal workers on high-pollution days and also compensate less on the following days. This suggests that informal workers may experience greater exposure to high pollution and greater reductions in labor supply and income. We provide evidence that reductions in labor supply due to high pollution are consistent with avoidance behavior and that income constraints may play an important role in workers' labor supply decisions.

Suggested Citation

  • Hoffmann, Bridget & Rud, Juan Pablo, 2022. "Exposure or Income? The Unequal Effects of Pollution on Daily Labor Supply," IDB Publications (Working Papers) 11985, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:11985
    DOI: http://dx.doi.org/10.18235/0004003
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    Cited by:

    1. Blaga Madzhurova & Dobrinka Stoyanova & Stefan Raychev, 2024. "The Impact of PM2.5 Exposure on Long-term Unemployment and Employment Rates: An Analysis of Environmental and Labor Market Challenges in Bulgaria and European Union," Proceedings of Economics and Finance Conferences 14516475, International Institute of Social and Economic Sciences.
    2. Ron Chan & Martino Pelli & Veronica Vienne, 2023. "Air Pollution, Smoky Days and Hours Worked," CIRANO Working Papers 2023s-15, CIRANO.
    3. Li, Meng & Zhou, Shaojie, 2023. "Pollutive cooking fuels and rural labor supply: Evidence from a large-scale population census in China," Energy Policy, Elsevier, vol. 183(C).

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    More about this item

    Keywords

    Air pollution; Informal workers; Mexico;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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