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28/05/2014 | Earnings Consequences of the Clean Air Act

Adam Isen, Maya Rossin-Slater, and W. Reed Walker

This paper examines the long-term impacts of in-utero and early childhood exposure to ambient air pollution on adult labor market outcomes. We take advantage of a new administrative data set that is uniquely suited for addressing this question because it combines information on individuals' quarterly earnings together with their counties and dates of birth. We use the sharp changes in ambient air pollution concentrations driven by the implementation of the 1970 Clean Air Act Amendments as a source of identifying variation, and we compare cohorts born in counties that experienced large changes in total suspended particulate (TSP) exposure to cohorts born in counties that had minimal or no changes. We find a significant relationship between TSP exposure in the year of birth and adult labor market outcomes. A 10 unit decrease in TSP in the year of birth is associated with a 1 percent increase in annual earnings for workers aged 29-31. Most, but not all, of this effect is driven by an increase in labor force participation. In present value, the gains from being born into a county affected by the 1970 Clean Air Act amount to about $4,300 in lifetime income for the 1.5 million individuals born into these counties each year.

 

The 1970 Clean Air Act Amendments (CAAA) in the United States limited the maximum allowable concentration of airborne total suspended particulates (TSP). As a result, the Environmental Protection Agency designated counties, or more specifically, air regions, as having "nonattainment" status under the new regulations if the monitored TSP concentrations exceeded the limit of 75 micrograms per cubic meter (µg/m3). Counties for which TSP levels were below the threshold were designated as "attainment" counties. Comparisons between attainment and nonattainment counties in the years after implementation of the regulation show a reduction in nonattainment counties' ambient TSP levels of about 10 percent.

In Every Breath You Take - Every Dollar You'll Make: The Long-Term Consequences of the Clean Air Act of 1970, Adam Isen, Maya Rossin-Slater, and W. Reed Walker exploit this regulatory variation in TSP levels over time and across counties to examine whether differences in exposure to TSPs at birth are correlated with long-run human capital measures at age 30. The authors link county of birth to administrative earnings records for residents of 24 states and conclude that a 10 percent decrease in TSPs in the year of birth is associated with a 1 percent increase in annual earnings at age 30. This translates to about $260 per year in 2008 dollars. Most of the difference in earnings capacity results from differences in the number of quarters worked rather than from differences in full-time wages. In 1972, there were about 1.5 million births in nonattainment counties, implying a cumulative earnings increase of about $6.5 billion annually per cohort. Assuming these effects are persistent over the lifetime earnings profile, the author s calculate that improved early-life air quality is correlated with total lifetime earnings gains of $4,300 per individual.

The authors use administrative earnings records from the Census Bureau's Longitudinal Employer-Household Dynamics file to link city and state of birth with later life earnings measures. The authors combine the administrative records with data from the Bureau of Economic Analysis's Regional Economic Information System and the National Center for Health Statistics to control for observable, time-varying determinants of later life outcomes that may be correlated with pollution in the year of birth. They find no evidence that family and child characteristics are differentially changing across counties in a manner correlated with the policy implementation.

---Linda Gorman


NBER (Estados Unidos)

 

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