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The Cost of Air Pollution for Workers and Firms

Author

Listed:
  • Marion Leroutier

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Hélène Ollivier

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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 (PM 2.5 ) on sales and worker absenteeism. Leveraging exogenous pollution shocks from local wind direction changes, we find that a 10 percent increase in monthly PM 2.5 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.

Suggested Citation

  • Marion Leroutier & Hélène Ollivier, 2025. "The Cost of Air Pollution for Workers and Firms," Working Papers hal-05009744, HAL.
    • Handle: RePEc:hal:wpaper:hal-05009744
    Note: View the original document on HAL open archive server: https://hal.science/hal-05009744v1
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