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Does haze cloud decision making? A natural laboratory experiment

Soo Hong Chew, Wei Huang and Xun Li

Journal of Economic Behavior & Organization, 2021, vol. 182, issue C, 132-161

Abstract: The adverse impact of haze on health and its association with a range of economic outcomes have received increasing attention in the literature. A natural laboratory experiment involving more than 600 subjects enables a first attempt at investigating the causal effect of haze, proxied by particulate matter of up to 2.5 microns in diameter (PM2.5) on decision making. This study was conducted in Beijing in October 2012 over five days with highly varying levels of PM2.5, which only became commonly known in China in 2013. We observed several effects associated with an increase in haze. In terms of individual decision making, we found increases in risk aversion and ambiguity aversion over gains. In terms of other-regarding behavior, subjects became less prosocial, giving less in a dictator game, contributing less in a public goods game, and reciprocating less in a sequential prisoners’ dilemma. Our results underpin several reported findings in the literature linking short-term variations in air quality to real-world economic variables, including stock market performance, worker productivity, movie attendance and revenue, criminal activities, and subjective wellbeing.

Keywords: PM2.5; Haze; Decision making; Economic preference; Experiment (search for similar items in EconPapers)
JEL-codes: C91 C92 D91 Q53 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jebo.2020.12.007

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