Breathing hazards: How air quality diminishes labor supply in Ulaanbaatar, Mongolia

Air pollution, as a byproduct of rapid economic development and urbanization, poses a critical challenge to labor market in developing countries, resulting in significant economic loss. This study investigates the short-term effects of air pollution on labor supply in Ulaanbaatar, Mongolia, a city tormented by severe winter pollution. Leveraging data from the Labor Force Survey and high-frequency air quality measurements, we employ an instrumental variable approach to address potential endogeneity in exposure to pollution. This study reveals a pronounced reduction in labor supply due to air pollution, with strong effects observed among female workers with young children and younger employees. The economic implications underscore the urgent need for targeted environmental policies, investments in renewable energy, modern heating technologies, and air purification systems to mitigate the economic and social costs of air pollution in emerging economies.