Pollution, Productivity and Willingness to Pay for Defensive Investments

Poor air quality has become a pressing environmental health concern in many low-income countries. In South Asia, more than 2 million deaths per year are caused by air pollution and the deaths caused by air pollution per capita have increased by 21% in the last 10 years, while it has decreased by 25% in high income countries. However, there remain major gaps in our understanding of the health and productivity effects of air pollution and more importantly the ability and willingness of individuals and firms to avoid these damages in low-income countries. To fill these gaps, we are conducting a field experiment with randomized allocation of air purifiers in small-scale textile firms in Bangladesh. The project will answer two questions. First, what is the effect of incomplete defensive investments that reduce exposure to air pollution for only part of the day? With ambient levels of air pollution exceedingly high in Dhaka, Bangladesh, air purifiers provide only temporary respite from air pollution. The absence of significant changes in regulatory enforcement, understanding the effect of such defensive investments in workplaces is paramount. Early results show that air purifiers decrease PM2.5 levels by 37% and increase worker productivity by 25%. Second, we will use revealed preference techniques to estimate firms’ and households’ willingness to pay for air purifiers. This will additionally allow us to estimate how information provision about productivity damages from air pollution changes the willingness to pay for defensive investments.