The interactive effects of temperature and air quality on productivity

This paper estimates the effects of carbon monoxide, sulphur dioxide, nitrogen dioxide, ozone, and particulate matter on the productivity at a Midwestern U.S.A. factory using real-time data from 1983-89. We confirm that elevated concentrations of the five pollutants significantly reduces productivity, with ozone and carbon monoxide having the largest effects. We also find that models including only one pollutant may yield biased marginal effects, with the largest bias in ozone, sulphur dioxide, and nitrogen dioxide. Additionally, omitting ozone leads to a substantial bias in the estimation of the productivity effects of temperature. This suggests that both temperature and ozone must be accounted for. Finally, we find that high temperatures meaningfully modify the marginal effects of pollutants, except for sulphur dioxide. Our results are found at pollution concentration levels that are lower than the current EPA standards.