Environment
Optimal environmental policy aims at equalizing benefits and costs of improving environmental quality. While the benefits generally accrue in the form of increased health, worker productivity, quality of life, and amenity values, the costs that environmental regulations might impose on the labor market are mostly borne through impacts on production, employment, and labor compensation. The articles illustrate how successful policy development requires information on the connection between environmental regulations, labor markets, and industrial activity.
Subject Editor
University of California Santa Barbara, USA, and IZA, Germany
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Does hot weather affect human fertility?
Hot weather can worsen reproductive health and decrease later birth rates
Alan Barreca, July 2017Research finds that hot weather causes a fall in birth rates nine months later. Evidence suggests that this decline in births is due to hot weather harming reproductive health around the time of conception. Birth rates only partially rebound after the initial decline. Moreover, the rebound shifts births toward summer months, harming infant health by increasing third trimester exposure to hot weather. Worse infant health raises health care costs in the short term as well as reducing labor productivity in the longer term, possibly due to lasting physiological harm from the early life injury.MoreLess -
Using natural resource shocks to study economic behavior
Natural resource shocks can help studying how low-skilled men respond to changes in labor market conditions
Dan A. Black, December 2019In the context of growing worldwide inequality, it is important to know what happens when the demand for low-skilled workers changes. Because natural resource shocks are global in nature, but have highly localized impacts on labor prospects in resource extraction areas, they offer a unique opportunity to evaluate low-skilled men's behavior when faced with extreme variations in local labor market conditions. This situation can be utilized to evaluate a broad range of outcomes, from education and income, to marital and fertility status, to voting behavior.MoreLess -
Climate change and the allocation of time
In various ways, climate change will affect people’s well-being and how they spend their time
Marie Connolly, January 2018Understanding the impacts of climate change on time allocation is a major challenge. The best approach comes from looking at how people react to short-term variations in weather. Research suggests rising temperatures will reduce time spent working and enjoying outdoor leisure, while increasing indoor leisure. The burden will fall disproportionately on workers in industries more exposed to heat and those who live in warmer regions, with the potential to increase existing patterns of inequalities. This is likely to trigger an adaptation, the scope and mechanisms of which are hard to predict, and will undoubtedly entail costs.MoreLess -
Economic effects of natural disasters
Natural disasters cause significant short-term disruptions, but longer-term economic impacts are more complex
Tatyana Deryugina, April 2022Extreme weather events are increasing in frequency and intensity, threatening lives and livelihoods around the world. Understanding the short- and long-term effects of such events is necessary for crafting optimal policy. The short-term economic impacts of natural disasters can be severe, suggesting that policies that better insure against consumption losses during this time would be beneficial. Longer-term economic impacts are more complex and depend on the characteristics of the affected population and the affected area, changes in migration patterns, and public policy.MoreLess -
Environmental regulations and labor markets Updated
Balancing the benefits of environmental regulations for everyone and the costs to workers and firms
Olivier Deschenes, November 2018Environmental regulations such as air quality standards can lead to notable improvements in ambient air quality and to related health benefits. But they impose additional production costs on firms and may reduce productivity, earnings, and employment, especially in sectors exposed to trade and intensive in labor and energy. Growing empirical evidence suggests that the benefits are likely to outweigh the costs.MoreLess -
Temperature, productivity, and income
Rising temperatures due to climate change could dampen productivity growth for decades
Olivier Deschenes, February 2023Climate change is rapidly deteriorating environmental conditions through droughts and floods, hurricanes, wildfires, rising temperatures, and more frequent and longer heatwaves. A growing literature has shown how higher temperatures reduce worker productivity and economic output. These effects are more pronounced in poorer countries and in climate-exposed economic sectors like agriculture, construction, and manufacturing. The development of new technologies that mitigate exposure to heat among workers, combined with better temperature control in the workplace, will be essential to reduce the economic burden of climate change.MoreLess -
Environmental regulations and business decisions
Environmental regulations impose costs on firms, affecting productivity and location but providing significant health benefits
Wayne B. Gray, September 2015Environmental regulations raise production costs at regulated firms, though in most cases the costs are only a small fraction of a firm’s total costs. Productivity tends to fall, and firms may shift new investment and production to locations with less stringent regulation. However, environmental regulations have had enormous benefits in terms of lives saved and illnesses averted, especially through reductions in airborne particulates. The potential health gains may be even greater in developing countries, where pollution levels are high. The benefits to society from environmental regulation hence appear to be much larger than the costs of compliance.MoreLess -
Impacts of regulation on eco-innovation and job creation Updated
Do regulation-induced environmental innovations affect employment?
Jens Horbach, November 2020New environmental technologies (environmental/eco-innovations) are often regarded as potential job creators—in addition to their positive effects on the environment. Environmental regulation may induce innovations that are accompanied by positive growth and employment effects. Recent empirical analyses show that the introduction of cleaner process innovations, rather than product-based ones, may also lead to higher employment. The rationale is that cleaner technologies lead to cost savings, which helps to improve firms’ competitiveness, thereby inducing positive effects on their market shares.MoreLess