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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
    as

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    References listed on IDEAS

    as
    1. Justin Bloesch & Francois Gourio, 2015. "The Effect of Winter Weather on U.S. Economic Activity," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I.
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    3. Ding Li & Yan Zhang & Shuang Ma, 2017. "Would Smog Lead to Outflow of Labor Force? Empirical Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(5), pages 1122-1134, May.
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    5. Bertrand, Jean-Louis & Brusset, Xavier & Fortin, Maxime, 2015. "Assessing and hedging the cost of unseasonal weather: Case of the apparel sector," European Journal of Operational Research, Elsevier, vol. 244(1), pages 261-276.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Air pollution; PM10; Consumption; Large store Retail Sales; Adaptation;
    All these keywords.

    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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