The Impact of Air Pollution on Cognitive Performance and Human Capital Formation

Cognitive performance is critical to productivity in many occupations and potentially linked to pollution exposure. We evaluate this potentially important relationship by estimating the effect of pollution exposure on standardized test scores among Israeli high school high-stakes tests (2000-2002). Since students take multiple exams on multiple days in the same location after each grade, we can adopt a fixed effects strategy estimating models with city, school, and student fixed effects. We focus on fine particulate matter (PM2.5) and carbon monoxide (CO), which are considered to be two of the most dangerous forms of air pollution. We find that while PM2.5 and CO levels are only weakly correlated with each other, both exhibit a robust negative relationship with test scores. We also find that PM2.5, which is thought to be particularly damaging for asthmatics, has a larger negative impact on groups with higher rates of asthma. For CO, which affects neurological functioning, the effect is more homogenous across demographic groups. We find that exposure to either pollutant is associated with a significant decline in the probability of not receiving a Bagrut certificate, which is required for college entrance in Israel. An implication of this finding is that by temporarily lowering the productivity of human capital, high pollution levels lead to allocative inefficiency as students with lower human capital are assigned a higher rank than their more qualified peers. This may lead to inefficient allocation of workers across occupations, and possibly a less productive workforce. * Corresponding author: [email protected]. Excellent research assistance was provided by Eyal Frank, Michael Freedman, Susan Schwartz, and Ben Raven. We thank seminar participants at Hebrew University, University of London Royal Holloway, University of Warwick, and NBER Summer Institute for useful comments and suggestions.