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

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  • Rema Hanna
  • Paulina Oliva

Abstract

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.

Suggested Citation

  • Rema Hanna & Paulina Oliva, 2011. "The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City," NBER Working Papers 17302, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17302
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    References listed on IDEAS

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    JEL classification:

    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • 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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