Air Pollution, Avoidance Behavior and Labor Supply: Evidence from the United States

I estimate the effects of exposure to ambient air pollution on daily health-related behaviors, weekly labor supply, and productivity at the workplace among US individuals. Using an individual fixed-effects regression approach, I examine how increases in daily outdoor air quality influence the time spent on daily health-related activities. I find that only when the air quality index becomes very unhealthy or hazardous, there is a 21% decrease in the minutes spent on outdoor sport and exercise activities, and a 263% increase in minutes spent watching TV. I also implement an instrumental variable (IV) strategy using wind direction as an exogenous shock to satellite-based aerosol optical depth to understand how changes in air pollution affect labor supply. I find that increase in the total aerosol optical depth (AOD) leads to no overall change in labor supply decisions, both on the decision to go to work and the weekly worked hours, but it does so on the likelihood of going to work for women. The effects across subgroups also suggest differential effects in avoidance behaviors across the income distribution, age groups, occupations, race, and ethnicity, especially when the air quality is very unhealthy or hazardous.