Air Pollution Reduces Economic Activity: Evidence from India

Arnold Behrer, Rishabh Choudhary and Dhruv Sharma

No 10515, Policy Research Working Paper Series from The World Bank

Abstract: Exposure to fine particulate pollution (PM2.5) increases mortality and morbidity and reduces human capital formation and worker productivity. As a consequence, high levels of particulate pollution may adversely affect economic activity. Using a novel dataset of changes in the annual gross domestic product of Indian districts, this paper investigates the impact of changes in the level of ambient PM2.5 on district-level gross domestic product. Using daily temperature inversions as an instrument for pollution exposure, this paper finds that higher levels of particulate pollution reduce gross domestic product. The effect is non-trivial—the median annual increase in the level of PM2.5 reduces year-to-year changes in gross domestic product by 0.56 percentage points.

Date: 2023-06-30
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