The Productivity Consequences of Pollution-Induced Migration in China

Gaurav Khanna, Wenquan Liang, Ahmed Mushfiq Mobarak and Ran Song

American Economic Journal: Applied Economics, 2025, vol. 17, issue 2, 184-224

Abstract: We quantify how pollution affects aggregate productivity and welfare in spatial equilibrium. We show that skilled workers in China emigrate away from polluted cities. These patterns are evident under various empirical specifications, such as when instrumenting for pollution using upwind power plants, or thermal inversions. Pollution changes the spatial distribution of skilled and unskilled workers, and wage returns by location. We quantify the loss in aggregate productivity due to this re-sorting by estimating a spatial equilibrium model. Counterfactual simulations show that reducing pollution increases productivity through spatial re-sorting by approximately as much as the direct health benefits of clean air.

JEL-codes: J24 J31 J61 P25 P28 Q53 R23 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/app.20220655

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