Economics & Finance / Economic Theory / Labor Economics
How a Factory Closure Made Workers 5% More Productive: The Pollution-Labor Link
The Effect of Pollution on Labor Supply: Evidence from a Natural Experiment in Mexico City
In 1991, Mexico City shut down a massive oil refinery. The result? Nearby workers suddenly worked 5.5% more hours per week. This isn't a coincidence—it's a natural experiment that reveals a hidden cost of pollution. Economists Rema Hanna and Paulina Oliva tracked 265 neighborhoods, using high-frequency pollution data to prove that cleaner air directly boosts labor supply. Key finding: a 1% drop in sulfur dioxide leads to a 0.61% increase in work hours. The effect is strongest for parents with young kids, and it's not about job losses or migration—it's about health. Watch to see how pollution silently steals your time and money, and why this changes everything for environmental policy.
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