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

Sunday, August 14, 2016

Too hot to work: global warming to cost $2 trillion in lost productivity

Rising temperatures caused by climate change may cost the world economy over $2 trillion in lost productivity by 2030 as hot weather makes it unbearable to work in some parts of the world, according to U.N. research published on July 19, 2016.

It showed that in Southeast Asia alone, up to 20 percent of annual work hours may already be lost in jobs with exposure to extreme heat with the figures set to double by 2050 as the effects of climate change deepen.

Across the globe, 43 countries will see a fall in their gross domestic product (GDP) due to reduced productivity, the majority of them in Asia including Indonesia, Malaysia, China, India and Bangladesh, researcher Tord Kjellstrom said.

Indonesia and Thailand could see their GDP reduced by 6 percent in 2030, while in China GDP could be reduced by 0.8 percent and in India by 3.2 percent.
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"Current climate conditions in tropical and subtropical parts of the world are already so hot during the hot seasons that occupational health effects occur and work capacity for many people is affected," said Kjellstrom, a director at the New Zealand-based Health and Environment International Trust.

He said the increasing need for rest "is likely to become a significant problem" as climate change makes the hottest days hotter and leads to longer periods of excessively hot days.
Kjellstrom authored one of six papers on the impact of climate change on health that were put together by the United Nations University's International Institute for Global Health in Kuala Lumpur and published in the Asia Pacific Journal of Public Health.

Kjellstrom warned that the lowest-paid workers - those in heavy labour, agricultural and manufacturing - were most at risk of exposure to extreme heat.
The other papers in the series showed around 2.1 million people worldwide died between 1980 and 2012 due to nearly 21,000 natural catastrophes such as floods, mudslides, extreme heat, drought, high winds or fires.  In Asia Pacific, 1.2 billon people have been affected by 1,215 disasters - mostly flood, cyclones and landslides - since 2000.

In April, 175 countries signed a Paris climate deal to restrain the global rise in temperatures to "well below" 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels.

The first three months of 2016 have broken temperature records and 2015 was the planet's warmest year since records began in the 19th century.

by Beh Lih Yi | @BehLihYi
Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, property rights and climate change. Visit
19 July 2016

A New Approach to an Age-Old Problem: Solving Externalities by Incenting Workers Directly

Understanding motivations in the workplace remains of utmost import as economies around the world rely on increases in labor productivity to foster sustainable economic growth. This study makes use of a unique opportunity to “look under the hood” of an organization that critically relies on worker effort and performance. By partnering with Virgin Atlantic Airways on a field experiment that includes over 40,000 unique flights covering an eight-month period, we explore how information and incentives affect captains’ performance. Making use of more than 110,000 captain-level observations, we find that our set of treatments—which include performance information, personal targets, and prosocial incentives—induces captains to improve efficiency in all three key flight areas: pre-flight, in-flight, and post-flight. We estimate that our treatments saved between 266,000-704,000 kg of fuel for the airline over the eight-month experimental period. These savings led to between 838,000-2.22 million kg of CO2 abated at a marginal abatement cost of negative $250 per ton of CO2 (i.e. a $250 savings per ton abated) over the eight-month experimental period. Methodologically, our approach highlights the potential usefulness of moving beyond an experimental design that focuses on short-run substitution effects, and it also suggests a new way to combat firm-level externalities: target workers rather than the firm as a whole.
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by Greer K. Gosnell, John A. List, Robert Metcalfe
National Bureau of Economic Research (NBER)
NBER Working Paper No. 22316; Issued in June 2016

Court backs Obama’s climate change accounting

A federal appeals court is upholding the Obama administration’s accounting of the costs of greenhouse gas emissions as applied to a Department of Energy (DOE) regulation.

In a unanimous decision late Monday, the Chicago-based 7th Circuit U.S. Court of Appeals rejected an industry-backed request to overturn a 2014 rule that set energy efficiency standards for commercial refrigerators.

In doing so, the court specifically backed the so-called social cost of carbon, President Obama’s administration-wide estimate of the costs per metric ton of carbon dioxide emitted into the atmosphere — currently $36.

The DOE used the carbon cost in its cost-benefit analysis, justifying the rule in part because of the amount of climate change regulators believe it would avoid.

It’s the first time a court has considered the legality of the carbon accounting, according to the Institute for Policy Integrity at New York University, which supports the policy and filed a brief backing the DOE in the case. Congressional Republicans, business interests and energy companies have criticized the accounting as bad math and improper forecasts.
“To determine whether an energy conservation measure is appropriate under a cost‐benefit analysis, the expected reduction in environmental costs needs to be taken into account,” the judges wrote. “We have no doubt that Congress intended that DOE have the authority under the [Energy Policy and Conservation Act] to consider the reduction in SCC.”

They went on the say that the industry challengers were incorrect in stating that the carbon cost is “irredeemably flawed,” concluding instead that “DOE’s determination of SCC was neither arbitrary nor capricious.”
The Air-Conditioning, Heating and Refrigeration Institute, which led the industry litigation, said it was “disappointed” with the ruling 

By Timothy Cama
August 9, 2016