Exposure and Income: Preliminary Findings on Labor Supply on High Pollution Days

Abstract

We study labor supply decisions on days with high levels of air pollution in Mexico City's metropolitan area using hourly levels of fine particulate matter (PM 2.5) air pollution at the locality level. We document a negative, non-linear relationship between PM 2.5 levels and daily labor supply, with strong effects on days with extremely high pollution levels. On these days, the average worker experiences a reduction of around 7.5% of working hours. Workers partially compensate for lost hours by increasing their labor supply on days that follow high pollution days. We provide evidence that income constraints may play an important role in workers labor supply decisions, as we find more moderate responses among informal and low-income workers.