Exposure to ambient PM2.5 and its association with the loss of labor productivity of manufacturing plants in India

Evidence of the impacts of ambient air pollution on health in India has been expanding. However, the economic impact of air pollution has rarely been explored. Here, we examined the impact of exposure to ambient fine particulate matter (PM_2.5) derived from satellite data at 1 km × 1 km resolution on the productivity of the manufacturing plants using a micro-level dataset for the period 2008–2009 and 2009–2010 across 465 districts in India. Using a system generalized methods of moments techniques, we estimated that for every 10% increase in PM_2.5 exposure, labor productivity decreases by 14.8% after controlling for the confounding factors. For exposure exceeding the national ambient air quality standard of annual PM_2.5 in India (40 μg m⁻³), the labor productivity decreases by a bigger margin (20%) for the same margin of increase in PM_2.5. We found that labor productivity loss due to ambient air pollution was lower for plants using capital-intensive production techniques. The labor productivity in plants with a higher share of blue-collar workers was more sensitive to exposure to PM_2.5 as opposed to plants with a higher share of supervisors or managerial staff. This suggests that plant-level managerial skill and capital-intensive production techniques (including expenditure on pollution control and abatement equipment) will be critical in mitigating air pollution-induced labor productivity loss across manufacturing plants in India.