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Achyuta Adhvaryu photo

The Impact of Climate and Pollution on Worker Productivity: Evidence from a Garment Factory in India

a PSC Research Project

Investigator:   Achyuta Adhvaryu

The proposed study will estimate the impacts of two critical determinants of development--climate and pollution--as well as analyse the benefits and costs of mitigating indoor air pollution. Worker productivity and labour outcomes like retention and attendance are critical to economic growth. Identifying their determinants, particularly those that are relatively inexpensive to mitigate, can inform effective economic and environmental policies. Temperature and humidity impacts on worker productivity inform not only firms? cost-benefit decisions with regard to investment in mitigation measures, but they also provide an indication of the economic impacts of global warming. Hsiang (2010) found that the impact of temperature on GDP was similar to the impacts of temperature on labour outcomes, indicating that climate change may impact GDP significantly through this mechanism.

However, there is little work exploring the impact of pollution or climate on worker productivity, a major reason for which is the lack of detailed worker productivity data. Furthermore, very few of these studies are in fast-growing developing countries. Since the pollution burden in developing countries is expected to increase in the short run, and access to adequate health facilities and environmental regulations and compliance may be limited, pollution may have significant economic impacts for these countries.

Bangalore, where our study will be based, is one of the largest and most commercially important cities in India. In recent years, it has also become one of the most polluted, with increasing economic activity and urbanization contributing to large increases in air pollution. A recent study tracked air pollution levels using satellite data for the 189 largest cities in the world, and found Bangalore to be amongst the most polluted (Alpert et al, 2012). The economic impacts of such high levels of pollution on worker productivity are unexplored. Understanding these impacts, therefore, can inform environmental and economic policies in India, in addition to quantifying whether firms affected by such externalities have incentives to mitigate them.

Global apparel is one of the largest export sectors in the world, and vitally important for economic growth in developing countries (Staritz 2010). India is the world?s second largest producer of textile and garments, with the export value totalling $10.7 billion in 2009-2010. The garment sector is characterized by a high degree of informality with only a few large firms, and high attrition rates are common. The majority of garment workers worldwide are women (Staritz 2010). Our study is thus couched in a key industry for India, in a fast-growing metropolitan city with high levels of baseline pollution.

We believe that the results on the impacts of pollution and climate conditions on productivity and attrition, tardiness, and absenteeism would be relevant to policymakers and civil society engaged in the formulation, analysis, and implementation of economic and environmental policies, including those related to climate change adaptation. Understanding better the trade-offs as well as complementarities between pollution and economic growth has the potential to inform effective policies. There is relatively little work in the literature that conducts such analyses, particularly for India. The health impacts of pollution which drive the relationship between pollution and worker productivity are of interest to policymakers and civil society as they inform stakeholders regarding the potential benefits of providing better access to low cost-healthcare. Furthermore, private firms, who bear this production externality of pollution, may have incentives to undertake mitigation measures, such as installing air filters or providing better healthcare access, if the costs of doing so are lower than the present value of the benefits obtained in terms of increased productivity, higher attendance, and lower attritio

Funding Period: 08/01/2014 to 06/30/2016

Country of Focus: India

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