Wednesday, August 17, 2016

The Effect of Pollution on Worker Productivity: Evidence from Call-Center Workers in China

We investigate the effect of pollution on worker productivity in the service sector by focusing on two call centers in China. Using precise measures of each worker’s daily output linked to daily measures of pollution and meteorology, we find that higher levels of air pollution decrease worker productivity by reducing the number of calls that workers complete each day. These results manifest themselves at commonly found levels of pollution in major cities throughout the developing and developed world, suggesting that these types of effects are likely to apply broadly. When decomposing these effects, we find that the decreases in productivity are explained by increases in time spent on breaks rather than the duration of phone calls. To our knowledge, this is the first study to demonstrate that the negative impacts of pollution on productivity extend beyond physically demanding tasks to indoor, white-collar work. 
Our analysis reveals a statistically significant, negative impact of pollution on the productivity of workers at the firm. A 10-unit increase in the air pollution index (API) decreases the number of daily calls handled by a worker by 0.35 percent on average.2 Productivity declines are largely linearly increasing in pollution levels, with statistically significant results emerging at an API above 100 for some measures of productivity and 150 for all of them. These estimates are robust to the inclusion of meteorology controls, worker-specific fixed effects, and a number of robustness checks that support the contention that we are estimating causal effects. Furthermore, when we decompose this effect, we find that the decrease in calls comes from an increase in the amount of time spent on breaks rather than from changes in the duration of phone calls, a finding consistent with Bloom et al. (2014), who found that breaks were the most malleable aspect of productivity at this firm.  
Air pollution enveloped the campus at Anyang Normal University, Henan Province, China. (Credit: V.T. Polywoda/Flickr)
A simple back-of-the-envelope calculation may be useful to fix ideas. The coefficient from our simple linear specification in Column 1 of Table 3 implies that a 10-unit change in the API translates into a 0.35 percent change in daily productivity. If we assume that this effect applies to all service-sector workers in China, an across the board 10-unit reduction in national pollution levels would increase the monetized value of worker productivity by more than $2.2 billion US per year. The service sector is defined to include: Hotels, IT, Financial Intermediation, Real Estate, Business Services, Science, Household Services, Education, Health, Sports, and Public Management. According to the National Bureau of Statistics of China (2014), the total urban wage bill in these sectors totaled 3,958,960 million Yuan in 2013. At 6.19 Yuan to the dollar in 2013, that translates into $639,243,040,000. Multiplying that figure by 0.35 percent yields $2,429,123,552.

That statistically significant effects emerge in some dimensions when the API exceeds 100 and for all outcome measures at an API of 150 suggests that this is not simply an issue for the world’s most-polluted cities, since such levels obtain with some frequency in urban environments around the world. Given the size of the service and knowledge sectors in the developed world, and the relatively high levels of labor productivity within them, even very small impacts from pollution could aggregate to rather substantial economic damages. The case of Los Angeles is illustrative. In 2014, the air quality index exceeded the EPA standard on 90 days. If all of those days were brought into regulatory compliance, service sector productivity in the county of Los Angeles would have been $374 million larger.  The EPA air quality standard is 100. Los Angeles County exceeded this figure on 90 days for a total of 1895 excess API points relative to the standard. The total service sector wage bill in Los Angeles County in 2014 was $205,620,109,131 (US Bureau of Labor Statistics, 2014), which translates into a daily service sector wage of $563,342,765. Multiplying the excess API points by the 0.35 percent coefficient per 10 API point change and the daily wage for the 90 days in violation implies a total productivity effect of $373,637,089.

by Tom Chang, Joshua Graff Zivin, Tal Gross, Matthew Neidell
National Bureau of Economic Research (NBER)
NBER Working Paper No. 22328; Issued in June 2016

No comments:

Post a Comment