The economic costs of pollution

Gray Matters: Fetal Pollution Exposure and Human Capital Formation
by Prashant Bharadwaj, Joshua Graff Zivin, Matthew Gibson, Christopher A. Neilson


This paper examines the impact of fetal exposure to air pollution on
4th grade test scores in Santiago, Chile. We rely on comparisons
across siblings which address concerns about locational sorting and
all other time-invariant family characteristics that can lead to
endogenous exposure to poor environmental quality. We also exploit
data on air quality alerts to help address concerns related to
short-run time-varying avoidance behavior, which has been shown to be
important in a number of other contexts. We find a strong negative
effect from fetal exposure to carbon monoxide (CO) on math and
language skills measured in 4th grade. These effects are
economically significant and our back of the envelope calculations
suggest that the 50% reduction in CO in Santiago between 1990 and
2005 increased lifetime earnings by approximately 100 million USD per
birth cohort.


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