The Cost of Air Pollution for Workers and Firms

Marion Leroutier () and Hélène Ollivier ()
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Marion Leroutier: CREST-ENSAE Paris
Hélène Ollivier: Paris School of Economics, CNRS

No 2025-05, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper shows that even moderate air pollution levels, such as those in Europe, harm the economy by reducing firm performance. Using monthly firm-level data from France, we estimate the causal impact of fine particulate matter (PM2.5) on sales and worker absenteeism. Leveraging exogenous pollution shocks from local wind direction changes, we find that a 10 percent increase in monthly PM2.5 exposure reduces firm sales by 0.4 percent on average over the next two months, with sector-specific variation. Simultaneously, sick leave rises by 1 percent. However, this labor supply reduction explains only a small part of the sales decline. Our evidence suggests that air pollution also reduces worker productivity and dampens local demand. Aligning air quality with WHO guidelines would yield economic benefits on par with the costs of regulation or the health benefits from reduced mortality.

Keywords: Cost of air pollution; Absenteeism; Firm performance (search for similar items in EconPapers)
JEL-codes: I1 J22 Q53 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2025-02-15
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