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What is the motivation of studying air pollution damages?
There is major threats of air pollution to life expectancy at an aggregate level
if PM2.5 levels are following WHO guidelines, there is a gain in life expectancy
Understanding these motivations helps identify effective policies to mitigate health risks associated with air pollution.
Challenges in measuring social costs of air pollution externalities
air pollution is not assigned randomly
pollution is not monitored randomly
many air pollutants are correlated
damage functions often reflect interactive effects
different pollutants combine to affect ambient air quality
hence, cannot be linearly estimated because of the correlation
short and long run exposure may have different effects
short run variation in air pollution levels is helpful in obtaining unbiased estimates of effects
however, long run responses may be quite different and we care more about this!
many outcomes may be affected
health
life expectancy, respiratory disease
mental illness
suicide
labour productivity
labour supply
cognitive performance
school absenteesim
agricultural yields
defensive expenditures
What kind of bias may occur in estimating relationship between air pollution and health outcomes?
Upward bias
people in polluted areas may have worse health for reasons unrelated to pollution ie: poverty, crime
Downward bias
polluted areas are more economically active
workers may have
higher incomes → better access to healthcare
younger populations → stronger immune systems
Why do we expect strategic behaviour in pollution monitoring?
firms may deliberately manipulate reported pollution levels to minimize regulatory scrutiny or avoid penalties.
lead to underreporting or selective compliance, particularly in the presence of economic incentives or lax enforcement.