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Does Air Pollution Affect Consumption Behavior? Evidence from Korean Retail Sales

Author

Listed:
  • Hyunju Kang

    (Korea Capital Market Institute)

  • Hyunduk Suh

    (Department of Economics, Inha University)

  • Jongmin Yu

    (Department of Economics, Hongik University)

Abstract

We conduct an empirical analysis on the effect of air pollution on retail sales, using monthly regional panel data on air quality and large retail store sales in Korea. We account for regional heterogeneity in air pollution and control for various macroeconomic and climatic factors that can affect retail sales. We also use the air quality indicator in the west coastal islands - affected by trans-border pollution, but uncorrelated with economic activity in the mainland - as an instrumental variable. The estimation result shows that one additional day of PM10 level higher than 80 reduces monthly retail sales by about 0.1 percent in general. However, an adaptive pattern appears over time, in particular when the level of air pollution in the previous month was severe.

Suggested Citation

  • Hyunju Kang & Hyunduk Suh & Jongmin Yu, 2017. "Does Air Pollution Affect Consumption Behavior? Evidence from Korean Retail Sales," Inha University IBER Working Paper Series 2017-4, Inha University, Institute of Business and Economic Research, revised Apr 2017.
    • Handle: RePEc:inh:wpaper:2017-4
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    Cited by:

    1. is not listed on IDEAS
    2. Cai, Zhengyu & Yan, Yu, 2025. "The Consumption Effects of Population Concentration," GLO Discussion Paper Series 1631, Global Labor Organization (GLO).
    3. Khadija Ashraf & Kangjae Lee & Geunhan Kim & Jeon-Young Kang, 2024. "Sales in Commercial Alleys and Their Association with Air Pollution: Case Study in South Korea," Sustainability, MDPI, vol. 16(2), pages 1-19, January.
    4. Sang-Hyeok Lee & Jung Eun Kang, 2022. "Spatial Disparity of Visitors Changes during Particulate Matter Warning Using Big Data Focused on Seoul, Korea," IJERPH, MDPI, vol. 19(11), pages 1-16, May.
    5. Kuroda, Yuta, 2022. "The effect of pollen exposure on consumption behaviors: Evidence from home scanner data," Resource and Energy Economics, Elsevier, vol. 67(C).
    6. Li, Chenxi & Xia, Xinyue & Lin, Yixun & Wen, Hanlin, 2024. "Polluted cognition: The effect of air pollution on online purchasing behavior," Journal of Retailing and Consumer Services, Elsevier, vol. 79(C).

    More about this item

    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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