Air pollution: a review of its economic effects and policies to mitigate them

By: Laura Hospido (Banco de España, CEMFI and IZA); Carlos Sanz (Banco de España and CEMFI); Ernesto Villanueva (Banco de España)

Abstract: Air pollution is an increasing cause of concern among the scientific community, policymakers and the general public. This interest has led to a sharp increase in the number of scientific papers on air pollution. This paper provides a summary of the most prominent recent economic literature on the effects of air pollution, the main policy lessons that can be drawn from it, and the areas in which more research would be especially valuable. The literature has found sizable negative effects of air pollution on health and mortality. There is also some evidence that air pollution may have negative non-health effects, reducing labour supply and productivity, although the evidence is more mixed on the latter aspect. The literature also suggests that effects on both health and non-health dimensions may be heterogeneous in a number of dimensions, most prominently age, with more negative effects for the elderly. Finally, more research is needed on which policies to tackle air pollution would be more cost-effective.

Keywords: air pollution, health, labour supply, productivity
JEL: I12 J22 J24 Q51 Q53



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