A large body of evidence suggests that exposure to air pollution harms human health, which casually associates with increasing infant mortality, hospitalization rates, impaired cognitive ability, and reduction in life expectancy （Chen, et al., 2013）. While the impacts of air pollution on traditional health outcomes have long been recognized, the evidence on human capital affected by air pollution exposure is just beginning to emerge. As human capital is an important engine to promote economic growth and innovation output, the following questions are raised: Does air pollution affect firm employee mobility? If so, how does this happen? China provides an ideal environment for us to test the above questions. First, with the rapid development of China’s economy, the problem of air pollution is becoming increasingly serious and highly variable both across geographies and time periods. According to World Health Organization standards, the air people breathe is ranked as China’s fourth greatest risk factor, and more than 50% of the population is exposed to unsafe levels of fine particulate matter. Second, the accumulation of human capital is still the key to the survival and development in Chinese firms, so the research on the causes of employee mobility is of great necessity. By using Chinese listed firm-level data from 2000 to 2014, we empirically investigate the influence of air pollution on firm employee mobility. Our results indicate that employees tend to migrate away from the firms headquartered in a city with severe air pollution. Causality is established using thermal inversions to construct the instrumental variable of local air quality. In addition, heterogeneity tests further show that such a negative effect is more pronounced for firms with low employee salaries, high educated talents and those belonging to competitive industries. The results are robust to a variety of model specifications and alternative measures. As a whole, the findings of this paper reveal the necessity of air pollution control from the perspective of human capital, and provide valuable empirical evidence for policy-makers and business administrators. We contribute to the literature in four aspects: First, we add to the outcomes on the intersection of the environment and labor economics by providing causal evidence that air quality can remarkably shape firm employee mobility. The findings contribute to a small but rapidly growing literature concerning the impact of air pollution on non-health outcomes. Second, existing literature mainly analyzes various factors affecting employee turnover intentions based on questionnaire surveys from the perspective of management and psychology, such as employee satisfaction, organizational commitment, salary, promotion opportunities and so on. The present study creatively investigates the impact of air pollution by extending the external determinants of firms’ employee mobility from the aspect of the natural environment. Third, we introduce thermal inversions as the exogenous instrumental variable for air quality to deal with possible endogeneity problems, which satisfies the relevance and validity criteria necessary for an appropriate instrument. Fourth, we further investigate the heterogeneity of the relationship between air pollution and firm employee mobility from both internal and external dimensions of firms.
/ Journals / Journal of Finance and Economics
Journal of Finance and Economics
Chuanhai Jiang, Editor-in-Chief Rong Lu, Vice Editor-in-Chief
Home > All Issues > 2020 > No.07 > Article Details
Air Pollution and Firm Employee Mobility
Journal of Finance and Economics Vol. 46, Issue 07, pp. 93 - 106 (2020) DOI:10.16538/j.cnki.jfe.2020.07.007
 Bu D L, Bai X D. Compensation, pay gap and employee turnover[J]. Economic Issues in China, 2013, (1): 100-108. (In Chinese)
 Chen S, Chen T. The rise of China’s coastal areas: Power of market[J]. Economic Research Journal, 2014, (8): 158-169. (In Chinese)
 Guo Y J, Zhang Y H. Can air quality affect the stock market?[J]. Journal of Financial Research, 2016, (2): 71-85. (In Chinese)
 Li W J, Zheng M N. Governance mechanism of air pollution and its effects: Evidence from Chinese prefecture-level cities[J]. China Industrial Economics, 2016, (4): 93-109. (In Chinese)
 Li J. The impact of air pollution on effective labor supply: Empirical research from China[J]. China Economic Studies, 2014, (5): 67-77. (In Chinese)
 Mao Q L, Xu J Y. Input trade liberalization and manufacturing job dynamics[J]. Economic Research Journal, 2016, (1): 69-83. (In Chinese)
 Shi Q L, Guo F, Chen S Y. “Political blue sky” in fog and haze governance: Evidence from the local annual “Two sessions” in China[J]. China Industrial Economics, 2016, (5): 40-56. (In Chinese)
 Wang M, Huang Y. China’s environmental pollution and economic growth[J]. China Economic Quarterly, 2015, (2): 557-578. (In Chinese)
 Wu Q, Ge Y H. Wage growth and job creation: Evidence from Chinese listed firms[J]. World Economic Papers, 2014, (3): 26-38. (In Chinese)
 Xu H X, Zhang W B. Study on the effect of air pollution on labor supply: Theoretical and empirical analysis[J]. Soft Science, 2017, (3): 99-102. (In Chinese)
 Zhao C M, Li H B. Export opening, expansion of higher education and wage gap[J]. The Journal of World Economy, 2014, (5): 3-27. (In Chinese)
 Anderson M L. As the wind blows: The effects of long-term exposure to air pollution on mortality[R]. NBER Working Paper No.21578, 2015.
 Arceo E, Hanna R, Oliva P. Does the effect of pollution on infant mortality differ between developing and developed countries? Evidence from Mexico city[J]. The Economic Journal, 2016, 126: 257-280. DOI:10.1111/ecoj.12273
 Chang T, Zivin J G, Gross T, et al. Particulate pollution and the productivity of pear packers[J]. American Economic Journal: Economic Policy, 2016a, 8(3): 141-169. DOI:10.1257/pol.20150085
 Chang T, Zivin J G, Gross T, et al. The effect of pollution on worker productivity: Evidence from call-center workers in China[R]. NBER Working Paper No.22328, 2016b.
 Chay K Y, Greenstone M. The impact of air pollution on infant mortality: Evidence from geographic variation in pollution shocks induced by a recession[J]. The Quarterly Journal of Economics, 2003, 118(3): 1121-1167. DOI:10.1162/00335530360698513
 Chen S, Oliva P, Zhang P. The effect of air pollution on migration: Evidence from China[R]. NBER Working Paper No.24036, 2017.
 Chen Y Y, Ebenstein A, Greenstone M, et al. Evidence on the impact of sustained exposure to air pollution on life expectancy from China’s Huai River policy[J]. Proceedings of the National Academy of Sciences of the United States of America, 2013, 110(32): 12936-12941. DOI:10.1073/pnas.1300018110
 Chen Y Y, Jin G Z, Kumar N, et al. Gaming in air pollution data? Lessons from China[J]. The B.E. Journal of Economic Analysis & Policy, 2012, 12(3): 1-43.
 Currie J, Hanushek E A, Kahn E M, et al. Does pollution increase school absences?[J]. Review of Economics and Statis- tics, 2009, 91(4): 682-694. DOI:10.1162/rest.91.4.682
 Currie J, Neidell M, Schmieder J F. Air pollution and infant health: Lessons from New Jersey[J]. Journal of Health Economics, 2009, 28(3): 688-703. DOI:10.1016/j.jhealeco.2009.02.001
 Currie J, Walker R. Traffic congestion and infant health: Evidence from E-ZPass[J]. American Economic Journal: Applied Economics, 2011, 3(1): 65-90. DOI:10.1257/app.3.1.65
 Davis S J, Haltiwanger J. Gross job creation, gross job destruction, and employment reallocation[J]. The Quarterly Journal of Economics, 1992, 107(3): 819-863. DOI:10.2307/2118365
 Deng X, Gao H S. Nonmonetary benefits, quality of life, and executive compensation[J]. Journal of Financial and Quantitative Analysis, 2013, 48(1): 197-218. DOI:10.1017/S0022109013000033
 Faleye O, Reis E, Venkateswaran A. The determinants and effects of CEO-employee pay ratios[J]. Journal of Banking & Finance, 2013, 37(8): 3258-3272.
 Ghanem D, Zhang J J. ‘Effortless perfection: ’ Do Chinese cities manipulate air pollution data?[J]. Journal of Environmental Economics and Management, 2014, 68(2): 203-225. DOI:10.1016/j.jeem.2014.05.003
 Groizard J L, Ranjan P, Rodriguez-Lopez A. Trade costs and job flows: Evidence from establishment-level data[J]. Economic Inquiry, 2015, 53(1): 173-204. DOI:10.1111/ecin.12139
 Hanna R, Oliva P. The effect of pollution on labor supply: Evidence from a natural experiment in Mexico City[J]. Journal of Public Economics, 2015, 122: 68-79. DOI:10.1016/j.jpubeco.2014.10.004
 He G J, Fan M Y, Zhou M G. The effect of air pollution on mortality in China: Evidence from the 2008 Beijing Olympic Games[J]. Journal of Environmental Economics and Management, 2016, 79: 18-39. DOI:10.1016/j.jeem.2016.04.004
 Jayachandran S. Air quality and early-life mortality: Evidence from Indonesia’s wildfires[J]. Journal of Human Resources, 2009, 44(4): 916-954. DOI:10.1353/jhr.2009.0001
 Jung B, Lee W J, Weber D P. Financial reporting quality and labor investment efficiency[J]. Contemporary Accounting Research, 2014, 31(4): 1047-1076. DOI:10.1111/1911-3846.12053
 Myers D. Internal monitoring of quality of life for economic development[J]. Economic Development Quarterly, 1987, 1(3): 268-278. DOI:10.1177/089124248700100309
 Qin Y, Zhu H J. Run away? Air pollution and emigration interests in China[J]. Journal of Population Economics, 2018, 31(1): 235-266. DOI:10.1007/s00148-017-0653-0
 Ransom M R, Pope C A. Elementary school absences and PM10 pollution in Utah valley[J]. Environmental Research, 1992, 58(1-2): 204-219. DOI:10.1016/S0013-9351(05)80216-6
 Romer P M. Increasing returns and long-run growth[J]. Journal of Political Economy, 1986, 94(5): 1002-1037. DOI:10.1086/261420
 Sanders N J, Stoecker C. Where have all the young men gone? Using sex ratios to measure fetal death rates[J]. Journal of Health Economics, 2015, 41: 30-45. DOI:10.1016/j.jhealeco.2014.12.005
 Stafford T M. Indoor air quality and academic performance[J]. Journal of Environmental Economics and Management, 2015, 70: 34-50. DOI:10.1016/j.jeem.2014.11.002
 Zheng S Q, Kahn M E, Sun W Z, et al. Incentives for China’s urban mayors to mitigate pollution externalities: The role of the central government and public environmentalism[J]. Regional Science and Urban Economics, 2014, 47: 61-71. DOI:10.1016/j.regsciurbeco.2013.09.003
 Zivin J G, Neidell M. Environment, health, and human capital[J]. Journal of Economic Literature, 2013, 51(3): 689-730. DOI:10.1257/jel.51.3.689
 Zivin J G, Neidell M. The impact of pollution on worker productivity[J]. American Economic Review, 2012, 102(7): 3652-3673. DOI:10.1257/aer.102.7.3652
Cite this article
Wang Li, Dai Yunhao, Xie Xiao, et al. Air Pollution and Firm Employee Mobility[J]. Journal of Finance and Economics, 2020, 46(7): 93-106.
Export Citations as: For