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, leading to adverse outcomes in the labor market. 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 observe strong nonlinear treatment effects, mainly driven by very high levels of NO₂. The probability of an accident is almost quadrupled when NO₂ levels cross into levels considered by the EPA as “unhealthy” (above the 99th percentile in our sample) compared to levels considered “clean” (below the 95th percentile in our sample). We also implement a set of instrumental variable analyses to support the causal interpretation of the results and present evidence suggestive of 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 and institutional information, which examines the viability of a potential welfare-improving policy to subsidize the closure of construction sites on highly polluted days.