Abstract
We measure the causal effects of long-term exposure to air pollution on individuals' health and labor market outcomes. When the Soviet Union -- the main provider of fossil fuels to Socialist East Germany after World War II -- unexpectedly cut oil exports in 1982, East Germany had to rapidly substitute oil with highly-polluting lignite coal. Exploiting the spatial distribution of lignite mines within East Germany, we show that counties close to lignite mines experienced a large and persistent increase in air pollution after 1982. Over the next four decades, individuals from exposed counties earned significantly lower wages, spent less time in employment, and retired earlier. Comparing effects along the age distribution, we find large negative effects for children below age 12 and adults above age 27. We identify these effects in an inverse movers design that leverages, first, authoritarian restrictions on individual freedom of movement and the non-competitive housing and labor markets of East Germany's command economy to rule out endogenous pollution mitigation and, second, the sudden lapse of these restrictions after German Reunification in 1990. Using survey data, we identify declining individual health as the mechanism driving these labor market effects.
Location
ECO-N Seminarraum, Hainstraße 11, 04109 Leipzig or Zoom