Air Pollution and the Labor Market: Evidence from Wildfire Smoke* Mark Borgschulte David Molitor Eric Yongchen Zou University of Illinois University of Illinois University of Oregon and IZA and NBER November 2019 Abstract We estimate labor market responses to transient air pollution events using a novel linkage of satellite images of wildfire smoke plumes to pollution monitor data and labor market outcomes in the United States. Smoke exposure reduces earnings in both the year of exposure and the following year, lowers labor force participation, and increases Social Security payments. With an average of 17.7 days of annual smoke exposure per person, earnings losses sum to 1.26 percent of annual labor income. We estimate that the welfare cost of these lost earnings exceeds the mortality cost of wildfire smoke. JEL Classification: I10, J21, Q51, Q52, Q53, Q54 Keywords: air pollution, labor supply, mortality, wildfires *Borgschulte: Department of Economics, University of Illinois (email:
[email protected]); Molitor: De- partment of Finance, University of Illinois (email:
[email protected]); Zou: Department of Economics, Univer- sity of Oregon (email:
[email protected]). We thank David Card, Olivier Deschênes, Don Fullerton, Michael Greenstone, Matthew Kotchen, Darren Lubotsky, Max Moritz, Edson Severnini, and seminar participants at Carnegie Mellon, the Hong Kong University of Science and Technology, the IZA Conference on Labor Market Effects of En- vironmental Policies, the Midwestern Economics Association Annual Meeting, the National Tax Association Annual Meeting, the NBER EEE Program Meeting, the Population Association of America Annual Meeting, the Society of Labor Economists Annual Meeting, the University of California at Davis, the University of Chicago, the University of Illinois at Chicago, the University of Illinois at Urbana-Champaign, the University of Michigan, and the W.E.