Does Air Pollution Affect Consumption Behavior? Evidence from Korean Retail Sales

Hyunju Kang (), Hyunduk Suh and Jongmin Yu
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Jongmin Yu: Department of Economics, Hongik University

No 2017-4, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: We conduct an empirical analysis on the effect of air pollution on retail sales, using monthly regional panel data on air quality and large retail store sales in Korea. We account for regional heterogeneity in air pollution and control for various macroeconomic and climatic factors that can affect retail sales. We also use the air quality indicator in the west coastal islands - affected by trans-border pollution, but uncorrelated with economic activity in the mainland - as an instrumental variable. The estimation result shows that one additional day of PM10 level higher than 80 reduces monthly retail sales by about 0.1 percent in general. However, an adaptive pattern appears over time, in particular when the level of air pollution in the previous month was severe.

Keywords: Air pollution; PM10; Consumption; Large store Retail Sales; Adaptation (search for similar items in EconPapers)
JEL-codes: E21 E60 Q53 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2017-04, Revised 2017-04
New Economics Papers: this item is included in nep-ene, nep-env and nep-mac
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https://drive.google.com/file/d/0B39YVuPWzf0ZZHlxZWMzVGYyelE/view First version, 2017 (application/pdf)

Related works:
Journal Article: Does Air Pollution Affect Consumption Behavior? Evidence from Korean Retail Sales (2019)
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