Canary in a Coal Mine: Infant Mortality, Property Values, and Tradeoffs Associated with Mid-20th Century Air Pollution

Karen Clay, Joshua Lewis, Edson Severnini

NBER Working Paper No. 22155
Issued in April 2016, Revised in June 2019
NBER Program(s):Children, Development of the American Economy, Environment and Energy Economics

Investments in local development and infrastructure projects often generate negative externalities such as pollution. Previous work has either focused on the potential for these investments to stimulate local economic activity or the health costs associated with air pollution. This paper examines the tradeoffs associated with the historical expansion in coal-fired electricity generation in the United States, which fueled local development but produced large amounts of unregulated air pollution. We focus on a highly responsive measure of health tradeoffs: the infant mortality rate. Our analysis leverages newly digitized data on all major coal-fired power plants for the period 1938-1962, and two complementary difference-in-differences strategies based on the opening of power plants and new generating units at existing sites. We find that coal-fired power plants imposed large negative health externalities, which were partially offset by the benefits from local electricity generation. We uncover substantial heterogeneity in these tradeoffs, both across counties and over time. Expansions in coal capacity led to increases in infant mortality in counties with high base- line access to electricity, but had no effect in low-access counties. Initial expansions in coal capacity led to decreases in infant mortality, but subsequent additions led to increases in infant mortality. These evolving tradeoffs highlight the importance of accounting for both current and future payoffs when designing environmental regulation.

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Document Object Identifier (DOI): 10.3386/w22155

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