Working Paper: NBER ID: w18935
Authors: Joshua Graff Zivin; Matthew Neidell
Abstract: In this review, we discuss three major contributions economists have made to our understanding of the relationship between the environment and individual well-being. First, in explicitly recognizing how optimizing behavior, particularly in the form of residential sorting, can lead to non-random assignment of pollution, economists have employed a wide range of quasi-experimental techniques to develop causal estimates of the effect of pollution. Second, economic research has placed a considerable focus on the role of avoidance behavior, which is an important component for understanding the difference between biological and behavioral effects of pollution and for proper welfare calculations. Lastly, economic research has expanded the focus of analysis beyond traditional health outcomes to include measures of human capital, including labor supply, productivity, and cognition. Our review of the quasi-experimental evidence on this topic suggests that pollution does indeed have a wide range of effects on individual well-being, even at levels well below current regulatory standards. Given the importance of health and human capital as an engine for economic growth, these findings underscore the role of environmental conditions as an important factor of production.
Keywords: environment; health; human capital; pollution; quasiexperimental techniques
JEL Codes: H23; H41; I12; J24; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| residential sorting (R23) | nonrandom assignment of pollution (Q52) |
| higher-income individuals move to areas with better air quality (R23) | overall pollution exposure of different socioeconomic groups (I14) |
| avoidance behavior (D91) | estimation of biological effects of pollution (Q51) |
| pollution (Q53) | health impacts (I12) |
| pollution (Q53) | human capital measures (J24) |
| pollution impacts traditional health outcomes and human capital measures (Q53) | understanding the role of environmental conditions as a factor of production (D24) |