IZA DP No. 16316: Air Pollution and Agricultural Productivity in a Developing Country
I document negative externalities of air pollution in the Indian agricultural sector. Using variation in pollution induced by changes in wind across years, I show that higher levels of pollution lead to decreased agricultural productivity, with large changes in productivity being common. The negative effects of pollution are larger in areas growing more labor-intensive crops, indicating that the pollution works at least partly through direct effects on labor productivity. Finally, combining wind direction with the rollout of coal plants, results indicate that pollution from coal plants has a larger effect on agricultural productivity than other types of pollution. Given that the agricultural sector is a refuge for the poor in many developing countries, these results suggest that the negative externalities of pollution may hit the poorest particularly hard.