The Productivity Consequences of Pollution-Induced Migration in China

Migration and pollution are two defining features of China's impressive growth performance over the last 30 years. In this paper we study migration response to in Chinese cities, its consequences for productivity welfare. We document a robust pattern which skilled workers emigrate more than unskilled. Their greater sensitivity air quality holds up cross-sectional variation across panel with individual fixed-effects, when instrumenting using distant power-plants upwind or thermal inversions that trap pollution. Pollution therefore changes spatial distribution unskilled workers, results higher returns skill cities educated migrate away from. quantify loss aggregate due re-sorting by estimating model demand supply cities. Counterfactual simulations from estimated show reducing would increase through approximately as much direct health benefits clean air. Physical institutional restrictions on mobility exacerbate welfare losses. People's dislike explains substantial portion wage gap between cities. Institutional subscribers NBER working series, residents developing countries may download without additional charge at www.nber.org.