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Brain drain: The impact of air pollution on firm performance

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  • Xue, Shuyu
  • Zhang, Bohui
  • Zhao, Xiaofeng
Abstract
Air pollution is a growing hazard to human health. This study examines whether air pollution affects the formation of corporate human capital and thereby firm performance. We find that people exhibit an intention to look for jobs in less polluted areas when air pollution is high in their location. This suggests that individuals arrange their lives at least partially in response to air pollution. Consistent with this hypothesis, we find that the level of skilled executives and employees at a firm drops significantly when information on pollution in the firm's location is accessible in real time and when the pollution level in the firm's location increases, especially in locations where air pollution poses greater health concerns. In addition, parallel reductions in firm productivity and value are found and become more salient when firms have a greater dependence on human capital.

Suggested Citation

  • Xue, Shuyu & Zhang, Bohui & Zhao, Xiaofeng, 2021. "Brain drain: The impact of air pollution on firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:jeeman:v:110:y:2021:i:c:s0095069621001054
    DOI: 10.1016/j.jeem.2021.102546
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    More about this item

    Keywords

    Air pollution; Brain drain; Human capital; Firm performance; China;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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