Quantifying The Health Factor as a Mediator of the Pollution-Productivity Relationships in Indonesia

Ghozi Naufal Ali (), Ester Dwi Sabtu (), Muhammad Putra () and Qisha Quarina ()
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Ghozi Naufal Ali: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada
Ester Dwi Sabtu: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada
Muhammad Putra: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada
Qisha Quarina: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada

No 202403004, Gadjah Mada Economics Working Paper Series from Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

Abstract: Pollution (in this term, air pollution) is an environmental phenomenon that negatively impacts the lives of the broader community and harms all aspects of the human dimension, such as health and the economy. This study aims to quantify the impact of pollution on worker productivity in developing countries using longitudinal data from Indonesia in two periods (2007 and 2014) and utilizing satellite data to represent air pollution data better. This study uses an instrumental variable (IV) approach and expands it by quantifying health aspects as one of the transmissions in the relationship between pollution and productivity. The result is that pollution negatively impacts worker productivity, with a dominant negative effect transmitted by health factors and determines their productivity. For this reason, the government is involved in tackling increasing pollution to minimize the increase in disease cases while minimizing economic losses from this phenomenon in the future.

Keywords: Pollution; Labor Productivity; Instrumental Variable (IV); Mediation Analysis; Developing Country (search for similar items in EconPapers)
JEL-codes: J21 J22 J24 Q52 Q53 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2024-03
New Economics Papers: this item is included in nep-dev, nep-eff, nep-ene, nep-env and nep-sea
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