NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Rema Hanna, Paulina Oliva

NBER Working Paper No. 17302
Issued in August 2011
NBER Program(s):   EEE

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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Document Object Identifier (DOI): 10.3386/w17302

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