Childhood Exposure to Particulate Air Pollution, Human Capital Accumulation, and Income: Evidence from China, joint with Michael Greenstone

This paper examines the impact of childhood exposure to particulate air pollution on human capital development and later labor market success. The analysis relies on a regression discontinuity design (RDD) generated by China’s Huai River Policy, which provided subsidized coal for indoor heating during the winter to cities north of the Huai River but not to those to the south. The estimation of the income effects uses the RDD to quasi-experimentally vary TSP exposure, while also adjusting for all current city-level determinants of income by comparing migrants who are born just to the north and south of the Huai River. This estimation is performed allowing for endogenous selection into migration in a Heckman-style model, where distance from major migrant destinations is used to vary the probability of selecting into migration. The key findings are that children born just to the north of the Huai River were exposed to TSP concentrations that were 172 mg/m³ higher, completed 0.74 fewer years of education, and earned 13.1 percent lower income as adults, relative to children born just to the south. We then estimate the projected welfare benefit of China reducing its ambient pollution, taking into account both the anticipated increase in worker productivity and decrease in mortality. We estimate that for the 2010 birth cohort, reducing pollution to the levels recommended by the WHO would generate $245 billion in welfare benefit, with nearly a third due to increased worker productivity. This calculation implies that cleaner air would provide a benefit equal to roughly six years of income to each member of the cohort.