Heads Up: Does Air Pollution Cause Workplace Accidents?

Literature has shown that air pollution can have short- and long-term adverse effects on physiological and cognitive performance. In this study, we estimate the effect of increased nitrogen dioxide (NO2), one of the primary air pollutants, on the likelihood of accidents in construction sites, a significant factor related to productivity losses in the labor market. Using data from all construction sites and pollution monitoring stations in Israel, we find a strong and significant connection between air pollution and construction site accidents. We find that a 10-ppb increase in NO2 levels increases the likelihood of an accident by as much as 25 percent. We present a mechanism where the effect of pollution is exacerbated in conditions with high cognitive strain or worker fatigue. Finally, we perform a cost–benefit analysis, supported by a nonparametric estimation examining a potential welfare-improving policy to subsidize the closure of construction sites on highly polluted days.