The dynamics of air pollution impacts.

AuthorNeidell, Matthew J.

Anthropogenic air pollution dates at least as far back as ancient Rome, and attempts to regulate it are known to have arisen as early as the 13th century. Although the nature and scale of this externality has changed dramatically since the Industrial Revolution, research on the health effects has typically been in the domain of epidemiologists and toxicologists. Economists have only recently contributed to this topic, having made several important contributions.

First, economists explicitly recognized how optimizing behavior, particularly in the form of residential sorting, can lead to endogenous pollution exposure. For example, since air quality is capitalized into housing prices, households with higher incomes may live in neighborhoods with better air quality. If these households also make other investments in their health, failing to account for them biases estimates of the effects of pollution. To address this, economists have employed a wide range of quasi-experimental techniques to provide causal estimates of the effect of pollution on health and human capital.

Second, stemming from this optimizing framework, economists have placed a considerable focus on avoidance behavior. Since the consequences of exposure to pollution are costly, individuals may engage in activities to avert them. This can bias estimates of the biological relationship between pollution and health. Furthermore, given that the activities that people engage in to avoid pollution are costly, avoidance behavior is a component of the social costs of poor environmental quality.

More recently, economic research has expanded the focus of analysis beyond traditional health outcomes to focus on a broader range of human capital outcomes, including worker productivity. Many of these impacts, particularly those where no health care services are used, are subtle and may be more pervasive throughout the economy than more extreme outcomes such as mortality and hospitalizations. If worker productivity is adversely affected by ambient pollution levels, environmental regulations that reduce these levels may increase the value of workers' human capital.

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Avoidance Behavior

My early research explored whether people respond to public information about pollution by reducing time spent outside, and how these responses affect the estimated relationship between ozone and health. (1) This work focused on smog alerts, which are issued when ground-level ozone is expected to exceed a particular threshold. The alerts are disseminated to encourage susceptible individuals, such as children and the elderly, to minimize time outdoors. Using originally collected data on daily attendance at two major outdoor facilities in Southern California, I explored whether people respond to smog alerts by reducing attendance at these facilities. Employing a regression discontinuity design to compare attendance on days just above versus just below the smog alert threshold to control for potential confounding, I found that there are significant declines in daily attendance on days when smog alerts are announced. This pattern is shown in Figure 1: all variables evolve smoothly with higher ozone levels, but only attendance abruptly drops when ozone reaches the value at which smog alerts are issued.

Since alerts are only issued when ozone is expected to be particularly...

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