Air pollution presents a significant risk to human health in India, a fact which is now widely appreciated. Less well-known is a body of evidence suggesting that air pollution harms the day-to-day functioning of those with no diagnosable health harms, through avenues such as impaired decision-making and reduced capabilities in a wide range of tasks. Aguilar-Gomez et al. outline this research on the ‘non-health’ impact of pollution in various industries, and the ways in which people respond to ambient pollution.
In its 2021 revision of global air quality guidelines, the World Health Organization noted that “[t]he burden of disease resulting from air pollution also imposes a significant economic burden” (WHO, 2021). This is certainly true in India, which is home to 39 of the world’s 50 most polluted cities in terms of PM2.5 particulate pollution, where an estimated 18% of all deaths are attributable to air pollution (Pandey et al. 2021). But a growing body of work shows that exposure to air pollution can also have significant impacts on both physical and cognitive performance. Although these adverse effects are not diagnosable as diseases, they can have impacts on economic output and wellbeing that may be causing widespread but hard-to-detect harm to many Indians.
Some of these ‘non-health’ effects occur at the time of exposure and represent short-term reductions in performance, such as lower worker efficiency on especially polluted days. Other impacts represent accrued physiological damage that falls below the level of a medical diagnosis, but still impacts behaviour. From a policymaking perspective, these findings imply that even small reductions in air pollution exposure may have substantial economy-wide implications, since the number of people potentially affected by pollution is far larger than the number with associated medical conditions, and the thresholds at which damage begins are below those at which medical symptoms develop.
The long- and short-term effects of air pollution
Greater air pollution exposure on a given day appears to reduce worker productivity in industries as disparate as garment production (Adhvaryu et al. 2019), agriculture (Graff Zivin and Neidell 2012), food processing (Chang et al. 2016), call centers (Chang et al. 2019) and the court system (Kahn and Li 2020). These short-term impacts on the productivity of on-site workers are not explainable as the result of new or ongoing medical conditions caused by prolonged exposure, or of acute symptoms that make employees miss work. Rather, they can be understood as ‘non-health’ productivity effects on the workforce, separate from the effects of medical conditions that might result from long-run exposure. Beyond its effects on workers present on site, air pollution also appears to reduce labour supply, partly through health-related mechanisms (Hanna and Oliva 2015, Aragón et al. 2017, Holub et al. 2021) and partly through costly migration to less-polluted areas (Khanna et al. 2021). The short-term productivity effects of air pollution do not seem to be limited to the subset of industries or locations that have so far been studied individually; estimates conducted at the regional level or with nationally comprehensive firm data also find meaningful impacts on overall output (Fu et al. 2018, Dechezleprêtre et al. 2019), which combine productivity and labour supply effects. The effects of air pollution on productivity are found even in settings where pollution is significantly less severe than it is currently in India, suggesting that these productivity decrements may also be operating on a significant share of the Indian workforce at any given time.
Why does air pollution reduce worker productivity across such a broad range of industries? The harmful effects of air pollution on the lungs and circulatory system might explain impacts on agricultural workers and workers in manufacturing, but workers in white-collar occupations may instead be suffering from air pollution’s effects on cognition and decision-making. Several studies find evidence that air pollution reduces scores on a variety of academic and cognitive tests (Ebenstein et al. 2016, Zhang et al. 2018, Roth 2021). These subtle cognitive difficulties may explain why air pollution seems to lead to increased behavioural biases among investors (Meyer and Pagel 2017, Huang et al. 2020, Dong et al. 2021), while the hypothesised impact of air pollution on impulse control may explain why higher pollution appears to increase rates of some types of crime (Bondy et al. 2020, Herrnstadt et al. 2021, Burkhardt et al. 2021).The effects of air pollution mentioned so far are caused by short-term fluctuations in air quality. But repeated exposure to air pollution can also reduce people’s capabilities in the longer term through accumulated damages, particularly when air pollution is present during gestation or early life. Such effects include negative impacts on academic performance as children (Sanders 2012, Bharadwaj et al. 2017), on college attendance (Voorheis 2017, Colmer and Voorheis 2020), and on employment and earnings as adults (Isen et al. 2017). More research on the long-run effects of pollution is needed in developing countries, but existing studies have found that air pollution’s detrimental impact on child health contributes, for instance, to the significant problem of child stunting in India (Balietti et al. 2022). Importantly, long-run impacts of pollution exposure are detectable even at the lower exposure levels found in the United States, suggesting that even many Indians whose exposure was not high enough to cause diagnosable stunting may still have suffered small but meaningful long-term reductions in their capabilities.
Delineating the true impact of air pollution
Discerning causation from correlation is an important part of research on the health and non-health impacts of air pollution. Researchers must confront the possibility that people exposed to higher levels of pollution also have other underlying factors that affect their productivity but are difficult to observe. For example, individuals exposed to higher levels of pollution may live in neighborhoods with fewer job prospects. Many of the above studies use quasi-experimental research designs, which attempt to exploit variation in pollution uncorrelated with these unobserved factors, stemming from sources such as changing wind patterns, randomly occurring wildfires, environmental policy changes, or closures of pollution-emitting factories.
Nevertheless, even when credibly identified, estimated pollution impacts need to be interpreted thoughtfully. The eventual net effect on outcomes may be reduced by behaviours like avoidance (staying inside on high-pollution days, buying air filters) and amelioration (spending more hours studying after failing a test in school). These behaviours may reduce pollution’s direct harms, but they represent real costs in time, money, or utility that are not captured by typical estimates.1
Understanding how people in India respond to ambient pollution, and how they can be helped to respond appropriately, represents an important area for further research alongside efforts to establish which means of reducing pollution emissions would be effective in India (Greenstone and Hanna 2012, Hanna et al. 2016, Jack et al. 2022). These responses may differ widely by context – workers in Mumbai skyscrapers may be able to run their air through filters, but agricultural workers near burning stubble or workers in India’s many small informal businesses may have greater difficulty in protecting themselves and in bearing the costs of adaptation. As a result of the likely difference in the ability to engage in avoidance behaviour, air pollution may have very unequal impacts on productivity, potentially exacerbating existing income inequality.
More research is still needed to better understand the non-health effects of air pollution. There is yet no agreement on the exact nature of its cognitive effects, or on the prevalence and costs of avoidance and amelioration behaviors in particular settings (Barwick et al. 2020, Khanna et al. 2021). But a growing body of evidence suggests that while many Indians suffer from diseases caused by air pollution, still greater numbers may be negatively affected by air pollution even if they never notice its impacts in a tangible way.
- In fact, demand for such goods and services increases market output as a consequence of reduced welfare, making it important not to focus on production or consumption as a proxy for welfare in these settings.
- Aguilar-Gomez, Sandra, Holt Dwyer, Joshua Graff Zivin and Matthew Neidell (2022), “This Is Air: The “Nonhealth” Effects of Air Pollution”, Annual Review of Resource Economics, 14: 403-425.
- Adhvaryu, A, N Kala and A Nyshadham (2019), ‘Management and shocks to worker productivity’, NBER Working Paper 25865.
- Aragón, Fernando M, Juan Jose Miranda and Paulina Oliva (2017), “Particulate matter and labor supply: the role of caregiving and non-linearities”, Journal of Environmental Economics and Management, 86: 295-309.
- Balietti, Anca, Souvik Datta and Stefanija Veljanoska (2020), “Air pollution and child development in India”, Journal of Environmental Economics and Management, 113: 102624.
- Barwick, PJ, S Li, L Lin and E Zou (2020), ‘From fog to smog: The value of Pollution Information’, VoxEU, 12 February.
- Bharadwaj, Prashant, Matthew Gibson. Joshua Graff Zivin and Christopher Neilson (2017), “Gray Matters: Fetal Pollution Exposure and Human Capital Formation”, Journal of the Association of Environmental and Resource Economists, 4(2): 505-542.
- Bondy, Malvina, Sefi Roth and Lutz Sager (2020), “Crime Is in the Air: The Contemporaneous Relationship between Air Pollution and Crime”, Journal of the Association of Environmental and Resource Economists, 7(3): 555-585.
- Burkhardt, Jesse, et al. (2019), “The effect of pollution on crime: evidence from data on particulate matter and ozone”, Journal of Environmental Economics and Management, 98: 102267.
- Chang Tom Y, Joshua Graff Zivin, Tal Gross and Matthew Neidell (2019), “The Effect of Pollution on Worker Productivity: Evidence from Call Center Workers in China”, American Economic Journal: Applied Economics, 11(1): 151-172.
- Colmer, J and J Voorheis (2020), ‘The Grandkids Aren’t Alright: The Intergenerational Effects of Prenatal Pollution Exposure’, Working Paper CES-20-36, US Census Bureau.
- Dechezleprêtre, A, N Rivers and B Stadler (2019), ‘The economic cost of air pollution: Evidence from Europe’, Economics Department Working Papers No. 1584, OECD.
- Dong, Rui, Raymond Fisman, Yongxiang Wang and Nianhang Xu (2021), “Air pollution, affect, and forecasting bias: Evidence from Chinese financial analysts”, Journal of Financial Economics, 139(3): 971-984.
- Ebenstein, Avraham, Victor Lavy and Sefi Roth (2016), “The Long-Run Economic Consequences of High-Stakes Examinations: Evidence from Transitory Variation in Pollution”, American Economic Journal: Applied Economics, 8(4) :36-65.
- Fu, S, VB Viard and P Zhang (2018), ‘Air Pollution and Manufacturing Firm Productivity: Nationwide Estimates for China’, SSRN Working Paper 2956505.
- Graff Zivin, Joshua and Matthew Neidell (2012) “The Impact of Pollution on Worker Productivity”, American Economic Review, 102(7): 3652-3673.
- Hanna, Rema and Paulina Oliva (2015), “The effect of pollution on labor supply: Evidence from a natural experiment in Mexico City”, Journal of Public Economics, 122: 68-79.
- Hanna, Rema, Esther Duflo and Michael Greenstone (2016), “Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves”, American Economic Journal: Economic Policy, 8(1): 80-114.
- Herrnstadt, Evan, Anthony Heyes, Erich Muehlegger and Soodeh Saberian (2021) “Air Pollution and Criminal Activity: Microgeographic Evidence from Chicago”, American Economic Journal: Applied Economics, 13(4): 70-100.
- Holub, F, L Hospido and UJ Wagner (2021), ‘Urban Air Pollution and Sick Leaves: Evidence from Social Security Data’, SSRN Working Paper 3572565.
- Huang, Jiekun, Nianhang Xu and Honghai Yu (2020), “Pollution and Performance: Do Investors Make Worse Trades on Hazy Days?”, Management Science, 66(10): 4455-4476.
- Isen, Adam, Maya Rossin-Slater and W Reed Walker (2017), “Every Breath You Take—Every Dollar You’ll Make: The Long-Term Consequences of the Clean Air Act of 1970”, Journal of Political Economy, 125(3): 848-902.
- Jack BK, S Jayachandran N Kala and R Pande (2022), ‘Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning’, NBER Working Paper 30690.
- Kahn, Matthew E and Pei Li (2020), “Air pollution lowers high skill public sector worker productivity in China”, Environmental Research Letters, 15(8): 084003.
- Khanna, G, W Liang, AH Mobarak and R Song (2021), ‘The productivity consequences of pollution-induced migration in China’, VoxEU, 8 April.
- Meyer, S and M Pagel (2017), ‘Fresh Air Eases Work – The Effect of Air Quality on Individual Investor Activity’, NBER Working Paper 24048.
- Pandey, Anamika, et al. (2021), “Health and economic impact of air pollution in the states of India: the Global Burden of Disease Study 2019”, Lancet Planet Health, 5(1): E25-E38.
- Roth, S (2021), ‘The Effect of Indoor Air Pollution on Cognitive Performance: Evidence from the UK’, Working Paper.
- Sanders, Nicholas J (2012), “What Doesn’t Kill You Makes You Weaker: Prenatal Pollution Exposure and Educational Outcomes”, Journal of Human Resources, 47(3): 826-850.
- Voorheis, J (2017), ‘Air Quality, Human Capital Formation and the Long-Term Effects of Environmental Inequality at Birth’, CARRA Working Paper Series 2017-05, US Census Bureau.
- World Health Organization (2021), ‘WHO global air quality guidelines: particulate matter (PM2.5 and PM10), ozone, nitrogen dioxide, sulfur dioxide and carbon monoxide’.
- Zhang, Xin, Xi Chen and Xiaobo Zhang (2018), “The impact of exposure to air pollution on cognitive performance”, PNAS, 115(37): 9193-9197.