Productivity Impact of Emissions Control When People and Particulates Are Mobile

Abstract

Health impacts of air pollutant emissions are centered around the source location and areas downwind: the pollution dispersion path. Emissions control measures will tend to increase productivity and amenity along this path. I show that changes in pollution-driven productivity and amenity lead workers to move away from dirtier cities in India, instrumenting for pollution using upwind residue burning. Ignoring these important spatial elements - geography and migration - risks misunderstanding the aggregate productivity gains from emissions control. To study the importance of these elements for spatial targeting of emissions control measures, I build a spatial equilibrium model that accounts for the movement of pollution and people across space. I apply this model to compare productivity gains between two emissions control scenarios: abatement of agricultural fires in rural northwestern India that disperse pollution across the north versus control of vehicular emissions that largely increase local pollution in India’s 10 largest cities. Both scenarios are constrained to achieve equal population exposure reductions, yielding comparable health benefits. Accounting only for differences in the geography of pollution between sources, I find that the city-based policy yields a threefold larger GDP gain. Allowing for migration response further doubles GDP gains only for the city-based policy. Productivity gains from labour reallocation to cleaner cities depend on the geography of the pollution source.