| Abstract: |
Literature has shown that air pollution can have short- and long-term adverse
effects on physiological and cognitive performance, leading to adverse
outcomes in the labor market. In this study, we estimate the effect of
increased nitrogen dioxide (NO₂), one of the primary air pollutants, on the
likelihood of accidents in construction sites, a significant factor related to
productivity losses in the labor market. Using data from all construction
sites and pollution monitoring stations in Israel, we find a strong and
significant connection between air pollution and construction site accidents.
We find that a 10-ppb increase in NO₂ levels increases the likelihood of an
accident by as much as 25 percent. We observe strong nonlinear treatment
effects, mainly driven by very high levels of NO₂. The probability of an
accident is almost quadrupled when NO₂ levels cross into levels considered by
the EPA as “unhealthy” (above the 99th percentile in our sample) compared to
levels considered “clean” (below the 95th percentile in our sample). We also
implement a set of instrumental variable analyses to support the causal
interpretation of the results and present evidence suggestive of a mechanism
where the effect of pollution is exacerbated in conditions with high cognitive
strain or worker fatigue. Finally, we perform a cost-benefit analysis,
supported by a nonparametric estimation and institutional information, which
examines the viability of a potential welfare-improving policy to subsidize
the closure of construction sites on highly polluted days. |