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The Productivity Consequences of Pollution-Induced Migration in China

Author

Listed:
  • Gaurav Khanna
  • Wenquan Liang
  • Ahmed Mushfiq Mobarak
  • Ran Song

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.

Suggested Citation

  • Gaurav Khanna & Wenquan Liang & Ahmed Mushfiq Mobarak & Ran Song, 2025. "The Productivity Consequences of Pollution-Induced Migration in China," American Economic Journal: Applied Economics, American Economic Association, vol. 17(2), pages 184-224, April.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:2:p:184-224
    DOI: 10.1257/app.20220655
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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