Bad for Business? The Impact of Air Quality on Firm outcomes in Germany.
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Series
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Speaker(s)Corrado Di Maria (University of East Anglia, United Kingdom)
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FieldSpatial Economics
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LocationTinbergen Institute, room 1.01
Amsterdam -
Date and time
June 05, 2025
11:30 - 12:30
Please note that this spatial seminar starts already at 11:30. Lunch will provided as usual.
Abstract
Whereas economic output and environmental quality have traditionally
been understood as substitutes, recent scientific evidence increasingly points
towards a complementary relationship, especially in high pollution contexts.
This paper focuses on a developed economy, Germany, and analyzes the impacts of
comparatively modest changes of air pollution on plant and firm-level outcomes
in the manufacturing sector. Using administrative micro data, we analyze the
causal effect of air pollution on a range of plant- and firm-level outcomes,
namely production value, hours worked, and salaries paid, allowing us to
disentangle productivity and absenteeism effects. Our results imply that air
pollution negatively impacts production in the German manufacturing sector. While
findings on hours worked are mixed, our results show that air pollution
increases labor costs, particularly for smaller firms, likely due to the need
to compensate absences through overtime. Larger firms are likely better able to
absorb absences, which is why we observe reduced hours worked for such firms.
We can also show that effects of air pollution materialize in the relatively
short time frame of individual days.