The Impact of Climate and Pollution on Worker Productivity: Evidence from India

This project seeks to explore the role of management in responding to productivity shocks, within the context of pollution in an Indian garment factory.

Global apparel is one of the largest export sectors in the world, and vitally important for economic growth in developing countries: India is the world’s second largest producer of textile and garments. However, garment production expose workers to both coarse particulate matter (PM) —a result of the production process, and fine particulate matter—a product of air pollution due to automobiles and industrial combustion. Exposure to PM impacts health, usually by impairing cardiac and respiratory functioning. Accordingly, workers’ productivity suffers in response to higher pollution exposure. The researchers hope to explore whether managerial prowess may be able to negate the negative impacts of pollution on their factory workers, and consequently boost efficiency.

This project tackles the way in which management practices mitigate losses from productivity shocks, using changes in ambient air pollution levels as a key factor increasing the effort a worker needs to make to achieve the same production levels (that is as to say that the cost of worker effort increases). The researchers plan to model the way in which managers interact with worker-level shocks, using hourly data on worker and line productivity, survey measures of managerial quality, and variation in pollution exposure. They will calibrate the model using data on individual productivity, managerial quality, and high frequency fluctuations in air pollution, which negatively impacts productivity. Managerial quality will be assessed through demographic characteristics, practices, skills, and personality traits. They will model the role of managerial quality on productivity via the re-optimization of production in response to worker-specific productivity shocks. This will lead to clearer understanding of whether or not good management can ameliorate pollution based productivity shocks.

In addition to direct impacts on health, PM pollution could well have strongly negative impacts on production. Policymakers weighing the costs and benefits of emissions reduction policies should factor in the returns to industrial productivity, particularly in urban centers that serve as manufacturing hubs. Moreover, the productivity shock that we examine (pollution) is highly persistent and likely to worsen over time. Being able to mitigate the unavoidable impacts of these shocks can lead to large productivity gains. Because the researchers will be examining ambient fine PM (not particulates created by the garment production process itself), the results from this study are likely to generalize to a range of labour-intensive industries across the developing world.