Market-based environmental regulations are seldom used in developing countries, where pollution is the highest but state capacity is often low. We experimentally evaluate a new particulate matter emissions market, the first in the world, covering industrial plants in a large Indian city. There are three main findings. First, the market functioned well: permit trade was active and plants obtained permits to meet their compliance obligations almost perfectly. Second, treatment plants, randomly assigned to the emissions market, reduced pollution emissions by 20% to 30%, relative to control plants. Third, the market, holding emissions constant, reduces abatement costs by 11% to 14%. These cost estimates are based on a model that estimates heterogeneous plant marginal abatement costs from plant bids for emissions permits. More broadly, we find that emissions can be reduced at small increases in abatement costs. The pollution market therefore has health benefits that exceed costs by at least twenty-five times.
Resubmitted, The Quarterly Journal of Economics, April 2024
Falling off-grid solar prices and subsidized grid extension are revolutionizing choice for the billion people without electricity. We use experimental price variation to estimate demand over all electricity sources in Bihar, India, during a four-year period when electrification rates leapt from 27% to 64%. We find that household surplus from electrification tripled, with gains due nearly as much to off-grid solar as to the subsidized grid. Choice matters—the surplus from electrification is 3-5× greater than from any one source. Nonetheless, we project future electrification will come mainly from the grid, since households prefer the grid as they grow wealthier.
April 2024
This paper develops the first globally comprehensive and empirically grounded estimates of worker disutility due to future temperature increases caused by climate change. Harmonizing daily worker-level data from seven countries representing nearly a third of the world’s population, we first evaluate the causal effect of daily temperature on labor supply, recovering an inverted U-shaped relationship where extreme cold and hot temperatures lead to labor supply losses for workers in weather-exposed industries. We then develop the first micro-founded, global estimates for how future climate change will impact workers, accounting for expected shifts in the global workforce towards less weather-exposed industries. Interpreting labor supply impacts of climate change through a simple theoretical framework, we monetize the implied disutility to workers of a warmer climate, a welfare cost not captured in any existing estimates. Under a high emissions scenario, we estimate the increase in labor disutility is valued at roughly 1.8% of global GDP in 2099, with damages being especially large in today’s poor and/or hot locations while cold locations benefit. Finally, we estimate that the release of an additional ton of CO2 today will cause expected labor disutility damages of $17.0 under a high emissions scenario and $10.8 under a moderate scenario, using a 2% discount rate that is justified by US Treasury rates over the last two decades. Accounting for uncertainty in these marginal damages when individuals are risk averse increases their value by 31% (high emissions scenario) and 62% (moderate scenario) under a standard parameterization of the utility function.
Under Review, April 2024
The demand for clean air is a key input in assessing the benefits and costs of air pollution policies, yet there are few estimates of this demand in the world’s most polluted cities. We present results from a field experiment designed to estimate the marginal willingness-to-pay (MWTP) for clean air in a representative sample of the urban poor in Delhi, India. Specifically, we estimate the trade-off between pollution exposure and prices revealed by individual decisions to adopt pollution masks. By combining random variation in the price of masks with weekly variation in ambient air pollution, we estimate average MWTP of $0.26 per unit reduction in fine particulate matter (PM2.5), an estimate that is lower than comparable measures from other settings. We find no evidence that demand is meaningfully higher when: (i) we provide information about the health impacts of PM2.5 and (ii) the government rolls out an unprecedented-scale mask distribution campaign. Mean estimates of MWTP, however, mask substantial heterogeneity: our data suggest that demand for clean air is significantly higher for high-income, more-educated, and male individuals. This suggests economic growth may be critical for India to substantially clean its air, over the short and medium-term.
April 2024
This paper reveals a stark inequality in the effect of ambient temperatures on death in human populations. Using district-level daily weather and annual mortality data from 1957 to 2000, we find that hot days lead to substantial increases in mortality in rural but not urban India. Despite being far poorer, the mortality response in urban India is not dissimilar to that in the US over the same period. Looking into potential mechanisms we find that the rural death effects are driven by hot days in the growing season which reduce productivity and wages in agriculture. Consistent with a model of endogenous survival in the face of credit constraints, we also find that the expansion of bank branches into rural India helped to mitigate these effects. When coupled with a climatological model that predicts many more hot days in a typical year by the end of this century, these estimates imply considerable reductions in rural Indian, but not urban Indian or US, life expectancy ceteris paribus.
April 2024
Poor water quality and sanitation are leading causes of mortality and disease in developing countries. However, interventions providing toilets in rural areas have not substantially improved health, likely because of incomplete coverage and low usage. This paper estimates the impact of an integrated water and sanitation improvement program in rural India that provided household-level water connections, latrines, and bathing facilities to all households in approximately 100 villages. The estimates suggest that the intervention was effective, reducing treated diarrhea episodes by 30-50%. These results are evident in the short term and persist for 5 years or more. The annual cost is approximately US$60 per household.
September 2015
We conducted a nationwide field experiment in China to evaluate the direct and indirect impacts of assigning firms to public or private citizen appeals treatments when they violate pollution standards. There are three main findings. First, public appeals to the regulator through social media substantially reduce violations and pollution emissions, while private appeals cause more modest environmental improvements. Second, experimentally adding “likes” and “shares” to social media appeals increases regulatory effort, suggesting visibility as an important mechanism. Third, treatment pollution reductions are not offset by control firm increases, based on randomly varying the proportion of treatment firms at the prefecture-level.
American Economic Review, March 2024, 114(3): 815-850.
We examine the introduction of automatic air pollution monitoring to counter suspected tampering at the local level, a central feature of China’s “war on pollution.” Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find an immediate and lasting increase of 35% in reported PM10 concentrations post–automation. Moreover, automation’s introduction increased online searches for face masks and air filters that are strong predictors of purchases. Overall, our findings suggest that the biased and imperfect information prior to automation led to suboptimal investments in defensive measures, plausibly imposing meaningful welfare costs.
American Economic Review: Insights, March 2022, 4(1): 54-70.
The decade from 2010 to 2019 marked a significant turning point in China’s approach to environmental regulation and pollution. This article describes the recent trends in air and water quality, with a focus on the 5 years following the Chinese government’s announcement of its “war on pollution” in 2014. We review the emerging literature that has taken advantage of recent improvements in data availability and accuracy to understand the social, economic, and health impacts of environmental pollution in China.
Review of Environmental Economics and Policy, 2021, 15(2): 281-299.
Delhi faces some of the world’s highest concentrations of PM2.5, the most damaging form of air pollution. Although awareness of outdoor air pollution is rising across the world, there is limited information on indoor air pollution (IAP) levels, particularly in heavily polluted cities like Delhi. Even less evidence exists on how IAP varies by socio-economic status (SES), and whether or not addressing information gaps can change defensive investments against IAP. In this paper, we deploy Indoor Air Quality Monitors (IAQMs) in thousands of Delhi households across varying socio-economic strata in order to document IAP levels during the peak wintertime air pollution period. Across high and low SES households, we document indoor PM2.5 levels that are: (1) extraordinarily high — more than 20 times World Health Organization (WHO) standards; (2) only 10 percent lower in high (versus low) SES households; and (3) significantly higher than levels reported by the nearest, outdoor government monitors, the main source of public information on air pollution in this setting. We then report on a field experiment that randomly assigned IAQMs, as well as an opportunity to rent an air purifier at a subsidized price, across medium and high SES homes during the 2019-20 winter season.
American Economic Association Papers and Proceedings, May 2021, 111: 420-424.
This paper seeks to explain why billions of people in developing countries either have no access to electricity or lack a reliable supply. We present evidence that these shortfalls are a consequence of electricity being treated as a right and that this sets off a vicious four-step circle. In step 1, because a social norm has developed that all deserve power independent of payment, subsidies, theft, and nonpayment are widely tolerated. In step 2, electricity distribution companies lose money with each unit of electricity sold and in total lose large sums of money. In step 3, government-owned distribution companies ration supply to limit losses by restricting access and hours of supply. In step 4, power supply is no longer governed by market forces and the link between payment and supply is severed, thus reducing customers’ incentives to pay. The equilibrium outcome is uneven and sporadic access that undermines growth.
Journal of Economic Perspectives, 2020 34(1): 145-169.
High pollution persists in many developing countries despite strict environmental rules. We use a field experiment and a structural model to study how plant emission standards are enforced. In collaboration with an Indian environmental regulator, we experimentally doubled the rate of inspection for treatment plants and required that the extra inspections be assigned randomly. We find that treatment plants only slightly increased compliance. We hypothesize that this weak effect is due to poor targeting, since the random inspections in the treatment found fewer extreme violators than the regulator’s own discretionary inspections. To unbundle the roles of extra inspections and the removal of discretion over what plants to target, we set out a model of environmental regulation where the regulator targets inspections, based on a signal of pollution, to maximize plant abatement. Using the experiment to identify key parameters of the model, we find that the regulator aggressively targets its discretionary inspections, to the degree that half of the plants receive fewer than one inspection per year, while plants expected to be the dirtiest may receive ten. Counterfactual simulations show that discretion in targeting helps enforcement: inspections that the regulator assigns cause three times more abatement than would the same number of randomly assigned inspections. Nonetheless, we find that the regulator’s information on plant pollution is poor, and improvements in monitoring would reduce emissions.
Econometrica, 2018, 86(6): 2123-2160.
This paper finds that a 10-μg/m3 increase in airborne particulate matter [particulate matter smaller than 10 μm (PM10)] reduces life expectancy by 0.64 years (95% confidence interval = 0.21–1.07). This estimate is derived from quasiexperimental variation in PM10 generated by China’s Huai River Policy, which provides free or heavily subsidized coal for indoor heating during the winter to cities north of the Huai River but not to those to the south. The findings are derived from a regression discontinuity design based on distance from the Huai River, and they are robust to using parametric and nonparametric estimation methods, different kernel types and bandwidth sizes, and adjustment for a rich set of demographic and behavioral covariates. Furthermore, the shorter lifespans are almost entirely caused by elevated rates of cardiorespiratory mortality, suggesting that PM10 is the causal factor. The estimates imply that bringing all of China into compliance with its Class I standards for PM10 would save 3.7 billion life-years.
Proceedings of the National Academy of Sciences, 2017, 114(39): 10384-10389.
Laboratory studies suggest that improved cooking stoves can reduce indoor air pollution, improve health, and decrease greenhouse gas emissions in developing countries. We provide evidence, from a large-scale randomized trial in India, on the benefits of a common, laboratory-validated stove with a four-year follow-up. While smoke inhalation initially falls, this effect disappears by year two. We find no changes across health outcomes or greenhouse gas emissions. Households used the stoves irregularly and inappropriately, failed to maintain them, and usage declined over time. This study underscores the need to test environmental technologies in real-world settings where behavior may undermine potential impacts.
American Economic Journal: Economic Policy, 2016, 8(1): 80-114.
This paper examines the relationship between income, pollution, and mortality in China from 1991-2012. Using first-difference models, we document a robust positive association between city-level GDP and life expectancy. We also find a negative association between city-level particulate air pollution exposure and life expectancy that is driven by elevated cardiorespiratory mortality rates. The results suggest that while China’s unprecedented economic growth over the last two decades is associated with health improvements, pollution has served as a countervailing force.
American Economic Review Papers and Proceedings, 2015, 105(5): 226-231.
Environmental quality in many developing countries is poor and generates substantial health and productivity costs. However, the few existing measures of marginal willingness to pay (MWTP) for environmental quality improvements indicate low valuations by affected households. This paper argues that this seeming paradox is the central puzzle at the intersection of environmental and development economics: Given poor environmental quality and high health burdens in developing countries, why is MWTP seemingly so low? We develop a conceptual framework for understanding this puzzle and propose four potential explanations for why environmental quality is so poor: (1) due to low income levels, individuals value increases in income more than marginal improvements in environmental quality; (2) the marginal costs of environmental quality improvements are high; (3) political economy factors undermine efficient policymaking; and (4) market failures such as weak property rights and missing capital markets distort MWTP for environmental quality. We review the literature on each explanation and discuss how the framework applies to climate change, which is perhaps the most important issue at the intersection of environment and development economics. The paper concludes with a list of promising and unanswered research questions for the emerging sub-field of “envirodevonomics.” ( JEL I15, O10, O44, Q50)
Journal of Economic Literature, 2015, 53(1): 5-42. Reprinted in Economics of the Environment: Selected Readings, Seventh Edition, editor Robert Stavins, Cheltenham, UK: Edward Elgar, 2019.
Using the most comprehensive developing country dataset ever compiled on air and water pollution and environmental regulations, the paper assesses India’s environmental regulations with a difference-in-differences design. The air pollution regulations are associated with substantial improvements in air quality. The most successful air regulation resulted in a modest but statistically insignificant decline in infant mortality. In contrast, the water regulations had no measurable benefits. The available evidence leads us to cautiously conclude that higher demand for air quality prompted the effective enforcement of air pollution regulations, indicating that strong public support allows environmental regulations to succeed in weak institutional settings.
American Economic Review, 2014, 104(10): 3038-3072.
In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This article reports on a two-year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.
Quarterly Journal of Economics, 2013, 128(4):1499-1545.
This paper’s findings suggest that an arbitrary Chinese policy that greatly increases total suspended particulates (TSPs) air pollution is causing the 500 million residents of Northern China to lose more than 2.5 billion life years of life expectancy. The quasi-experimental empirical approach is based on China’s Huai River policy, which provided free winter heating via the provision of coal for boilers in cities north of the Huai River but denied heat to the south. Using a regression discontinuity design based on distance from the Huai River, we find that ambient concentrations of TSPs are about 184 μg/m3 [95% confidence interval (CI): 61, 307] or 55% higher in the north. Further, the results indicate that life expectancies are about 5.5 y (95% CI: 0.8, 10.2) lower in the north owing to an increased incidence of cardiorespiratory mortality. More generally, the analysis suggests that long-term exposure to an additional 100 μg/m3 of TSPs is associated with a reduction in life expectancy at birth of about 3.0 y (95% CI: 0.4, 5.6).
Proceedings of the National Academy of Sciences, 2013, 110(32): 12936-12941.
We study differences in quality in the market for third-party environmental auditors in Gujarat, India. We find that, despite the low overall quality, auditors are heterogeneous and some perform well. We posit that these high-quality auditors survive by using their good name to insulate select client plants from regulatory scrutiny. We find two pieces of evidence broadly consistent with this hypothesis: (i) though estimates are not precise, higher-quality auditors appear to be paid more both in their work as third-party auditors and in their complementary work as consultants; and (ii) plants with high-quality auditors incur fewer costly penalties from the regulator.
American Economic Review Papers and Proceedings, 2013, 103(3): 314-319.
American Economic Review Papers and Proceedings, 2009, 99(2): 184-190.
Pollution is the largest environmental cause of disease and premature death in the world today. Diseases caused by pollution were responsible for an estimated 9 million premature deaths in 2015—16% of all deaths worldwide—three times more deaths than from AIDS, tuberculosis, and malaria combined and 15 times more than from all wars and other forms of violence. In the most severely affected countries, pollution-related disease is responsible for more than one death in four.
Pollution disproportionately kills the poor and the vulnerable. Nearly 92% of pollution-related deaths occur in low-income and middle-income countries and, in countries at every income level, disease caused by pollution is most prevalent among minorities and the marginalised. Children are at high risk of pollution-related disease and even extremely low-dose exposures to pollutants during windows of vulnerability in utero and in early infancy can result in disease, disability, and death in childhood and across their lifespan.
The Lancet, 2018, Vol 391(10119), 462–512.
Using the most comprehensive developing country dataset ever compiled on air and water pollution and environmental regulations, the paper assesses India’s environmental regulations with a difference-in-differences design. The air pollution regulations are associated with substantial improvements in air quality. The most successful air regulation resulted in a modest but statistically insignificant decline in infant mortality. In contrast, the water regulations had no measurable benefits. The available evidence leads us to cautiously conclude that higher demand for air quality prompted the effective enforcement of air pollution regulations, indicating that strong public support allows environmental regulations to succeed in weak institutional settings.
Economic and Political Weekly , 2015, 50(8): 40-46.
Health and South Asia, Cambridge: Harvard South Asia Institute, 2013, pp. 61-65.
This paper connects experience with emissions trading, from programs like the U.S. Rain program, to lessons for implementation of a Trading Pilot Scheme in India. This experience suggests that four areas are especially important for successful implementation of an emissions trading scheme.
Discussion Paper, Ministry of Environment and Forest, Government of India, August, 2010.
Indoor air pollution emitted from traditional fuels and cooking stoves is a potentially large health threat in rural regions. This paper reports the results of a survey of traditional stove ownership and health among 2,400 households in rural Orissa. We find a very high incidence of respiratory illness. About one-third of the adults and half of the children in the survey had experienced symptoms of respiratory illness in the 30 days preceding the survey, with 10 per cent of adults and 20 per cent of children experiencing a serious cough. We find a high correlation between using a traditional stove and having symptoms of respiratory illness. We cannot, however, rule out the possibility that the high level of observed respiratory illness is due to other factors that also contribute to a household’s decision to use a traditional stove, such as poverty, health preferences and the bargaining power of women in the household.
Economic and Political Weekly, 2008, 43(32): 71-76.
Indoor air pollution (IAP) caused by solid fuel use and/or traditional cooking stoves is a global health threat, particularly for women and young children. The WHO World Health Report 2002 estimates that IAP is responsible for 2.7% of the loss of disability adjusted life years (DALYs) worldwide and 3.7% in high mortality developing countries. Despite the magnitude of this problem, social scientists have only recently begun to pay closer attention to this issue and to test strategies for reducing IAP. In this paper, we provide a survey of the current literature on the relationship between indoor air pollution, respiratory health and economic well-being. We then discuss the available evidence on the effectiveness of popular policy prescriptions to reduce IAP within the household.
Surveys and Perspectives Integrating Environment and Society, 2008, 1(1).
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