Air Pollution and Employee Protection: The Moderating Effect of Public Attention and Environmental Regulations

Abstract

Air pollution is imposing substantial health and economic burdens on billions of people around the world. Although the impacts of air pollution on human health and economic growth have long been recognized, empirical evidence on whether and how air pollution affects firms’ employee protection remains unclear. Using a sample of publicly listed Chinese firms from 2010 to 2019, we show that air pollution can significantly increase firms’ employee protection. The results indicate that employee protection is an effective substitute for poor air quality in firm headquarters. Further analyses suggest that public pressure enhances the influence of air pollution on firms’ labor protection, while environmental regulation lessens the positive relationship between air pollution and employee treatment. Overall, we emphasize that air pollution is a significant non-economic determinant affecting firms’ human capital stock and employee treatment strategy. This study would be of particular interest to economists, managers, and regulators who are concerned about designing optimal environmental and welfare policies.