Gray Matters: Fetal Pollution Exposure and Human Capital Formation

Bharadwaj, P, M Gibson, J Graff Zivin, and C Neilson “Gray Matters: Fetal Pollution Exposure and Human Capital Formation,” Journal of the Association of Environmental and Resource Economists, 4(2017): 505-542.

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This paper examines the impact of fetal exposure to air pollution on fourth-grade test scores in Santiago, Chile. We rely on comparisons across siblings which ad-dress concerns about locational sorting (for nonmovers) and all other time-invariant family characteristics that can lead to endogenous exposure to poor environmental quality. We also exploit data on air quality alerts to help address concerns related to short-runtime-varying avoidance behavior, which has been shown to be important in a number of other contexts. We find a strong negative effect from fetal exposure to carbon mon-oxide (CO) and correlated pollutants (like PM10) on math and language skills measured in fourth grade. These effects are economically significant, and our back-of-the-envelope calculations suggest that the 50% reduction in CO in Santiago between 1990and 2005 increased lifetime earnings by approximately US$100 million per birth cohort.