Pollution Mitigation and Productivity in Developing Countries

August 23, 2018

Congratulations to Professor Gautam Gowrisankaran for receiving a $202,831 award from the National Science Foundation for his project titled "Collaborative Research: Pollution Mitigation and Productivity in Developing Countries."  Professor Gowrisankaran is working collaboratively with Professor Ali Hortaçsu in the Department of Economics at The University of Chicago.

The economies of many developing countries have experienced huge transformations over the past 20 years, but a major cost of development has been air and water pollution. As these countries have become wealthier, pollution reduction has become a priority of their governments. Even though pollution reduction has become a priority, pollution remains a huge problem in developing countries. Air and water contamination in many developing countries remain at very high levels. Moreover, this pollution is aeffecting the health and longevity of its residents and the productivity of its workers, and there is substantial willingness to pay to avoid pollution.

The fact that pollution remains a central problem for many developing countries suggests that it may be very costly to mitigate pollution, in terms of lost productivity and revenues. This view is supported by studies that find a substantial productivity cost of pollution mitigation in the U.S. context, but is refuted by the Porter hypothesis that postulates that environmental policies lead to greater productivity. The current empirical evidence on these tradeoffs is both limited and ambiguous, with some studies finding a substantial productivity cost of pollution mitigation and others finding evidence in favor of the Porter hypothesis.

This proposal has two goals. First, we seek to evaluate whether policies in developing countries to lower pollution have been successful. Second, we seek to quantify the productivity and distributional costs of these policies. We will investigate these research questions for both the manufacturing and power generation sectors.