Variation in ozone concentrations at ozone levels well below federal air quality standards have a significant impact on productivity.
Ozone pollution is a pervasive environmental issue throughout much of the world. Debates over the optimal level of ozone have been ongoing for many years, and current efforts to strengthen environmental regulations affecting ozone concentrations remain contentious. Defining regulatory thresholds depends, in part, on the benefits associated with avoided exposure, which traditionally have been estimated through a focus on high-visibility health effects, such as hospitalizations and mortality.
In The Impact of Pollution on Worker Productivity (NBER Working Paper No. 17004), authors Joshua Graff Zivin and Matthew Neidell instead ask whether reductions in ambient ozone concentrations can add to human capital and therefore enhance productivity. Using data on the productivity of agricultural workers, along with information about environmental conditions that come from the California air monitoring network, they analyze the relationship between ozone concentrations during the typical workday and farm worker productivity. They find that variation in ozone concentrations at levels well below federal air quality standards have a significant impact on productivity. Their central estimate suggests that a 10 ppb (parts per billion) decrease in ozone concentration increases worker productivity by 4.2 percent.
This environmental productivity effect suggests that characterizing environmental protection as purely a tax on producers and consumers, to be weighed against the consumption benefits associated with improved environmental quality, may ignore potentially important effects of such policies on human capital. The labor productivity impacts estimated in this paper can help to make these benefit calculations more complete. They indicate that higher ozone concentrations, even at levels below current air quality standards in most of the world, have significant negative effects on worker productivity. This finding suggests a source of potential economic benefits from strengthening regulations on ozone pollution; these benefits of course need to be compared with other costs and benefits.
The impact of ozone on agricultural workers is also important in its own right. A quick estimate suggests that a 10 ppb reduction in the ozone standard would translate into an annual cost saving of approximately $1.1 billion in labor expenditure. In the developing world, where national incomes depend heavily on agriculture, such productivity effects are likely to have a large impact on the economy. These effects may be especially large in countries like India, China, and Mexico, where rapid industrial growth and automobile penetration contribute to high levels of ozone pollution.
Whether the findings in this paper can be generalized to other pollutants and industries is unclear, according to the authors, but worthy of investigation. For example, agricultural workers face considerably higher levels of exposure to pollution than individuals who work indoors. Still, roughly 11.8 percent of the U.S. labor force works in an industry with regular exposure to outdoor conditions, and this figure is much higher for the middle- and lower-income countries.