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The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City

  • Rema Hanna
  • Paulina Oliva

Moderate effects of pollution on health may exert an important influence on labor market decisions. We exploit exogenous variation in pollution due to the closure of a large refinery in Mexico City to understand how pollution impacts labor supply. The closure led to an 8 percent decline in pollution in the surrounding neighborhoods. We find that a one percent increase in sulfur dioxide results in a 0.61 percent decrease in the hours worked. The effects do not appear to be driven by labor demand shocks nor differential migration as a result of the closure in the areas located near the refinery.

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File URL: http://www.nber.org/papers/w17302.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17302.

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Date of creation: Aug 2011
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Handle: RePEc:nbr:nberwo:17302
Note: EEE
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  1. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
  2. Seema Jayachandran, 2009. "Air Quality and Early-Life Mortality: Evidence from Indonesia’s Wildfires," Journal of Human Resources, University of Wisconsin Press, vol. 44(4).
  3. Ernst Fehr & Lorenz Goette, . "Robustness and Real Consequences of Nominal Wage Rigidity," IEW - Working Papers 044, Institute for Empirical Research in Economics - University of Zurich.
  4. Crocker, Thomas D & Horst, Robert L, Jr, 1981. "Hours of Work, Labor Productivity, and Environmental Conditions: A Case Study," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 361-68, August.
  5. West, Sarah E. & Williams III, Roberton C., 2007. "Optimal taxation and cross-price effects on labor supply: Estimates of the optimal gas tax," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 593-617, April.
  6. Jesse Schwartz & Robert Repetto, 2000. "Nonseparable Utility and the Double Dividend Debate: Reconsidering the Tax-Interaction Effect," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(2), pages 149-157, February.
  7. Bovenberg, A. Lans & Goulder, Lawrence H., 1997. "Costs of Environmentally Motivated Taxes in the Presence of Other Taxes: General Equilibrium Analyses," National Tax Journal, National Tax Association, vol. 50(1), pages 59-88, March.
  8. Lucas W. Davis, 2008. "The Effect of Driving Restrictions on Air Quality in Mexico City," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 38-81, 02.
  9. Kenneth Y. Chay & Michael Greenstone, 1999. "The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession," NBER Working Papers 7442, National Bureau of Economic Research, Inc.
  10. William Walker, 2012. "The Transitional Costs of Sectoral Reallocation: Evidence from the Clean Air Act and the Workforce," Working Papers 12-02, Center for Economic Studies, U.S. Census Bureau.
  11. Williams III, Roberton C., 2003. "Health effects and optimal environmental taxes," Journal of Public Economics, Elsevier, vol. 87(2), pages 323-335, February.
  12. Eva O. Arceo Gómez & Raymundo M. Campos-Vázquez, 2010. "Labor supply of married women in Mexico: 1990-2000," Serie documentos de trabajo del Centro de Estudios Económicos 2010-16, El Colegio de México, Centro de Estudios Económicos.
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