WP 2022.10 The impact of air pollution on labour productivity in France

Clara Kögel

Abstract
This paper investigates the effect of air pollution on labour productivity in French establishments in both manufacturing and non-financial market services sectors from 2001 to 2018. An instrumental variable approach based on planetary boundary layer height and wind speed allows identifying the causal effect of air pollution on labour productivity. The finding shows that a 10% increase in fine particulate matter leads, on average, to a 1.5% decrease in labour productivity, controlling for firm-specific characteristics and other confounding factors. The analysis also considers different dimensions of heterogeneity driving this adverse effect. The negative impact of pollution is mainly driven by service-intensive firms and sectors with a high share of highly skilled workers. This finding is in line with the expectation that air pollution affects cognitive skills, concentration, headache, and fatigue in non-routine cognitive tasks. Compared to the marginal abatement cost of PM 2.5 reductions by the Air Quality Directive 2008/50/EC, the estimated gains only from the labour productivity channel could largely offset the abatement cost. All in all, these estimates suggest that the negative impact of air pollution is much larger than previously documented in the literature.

WP 2022.09 Construire un indicateur de PIB inclusif et soutenable. Que peuvent apporter les valeurs de référence du calcul économique ?
(Building an inclusive and sustainable GDP indicator)

Selma Labroue – Dominique Bureau

Abstract
National accounts ignore the non-market components of well-being linked to the state of the environment and leave aside questions of inclusiveness and sustainability, “GDP” remains the key indicator for assessing the wealth of a country. Following the Stiglitz-Sen-Fitoussi commission, this indicator was supplemented by additional indicators, which made it possible to enrich the analyses, but at the cost of the dispersion of ever more multidimensional approaches. In this paper, we examine the opportunity of supplementing the usual indicators of GDP and savings, to integrate into them the dimensions linked to equity, the natural heritage (greenhouse effect and biodiversity), education and population health. These adjustments lead us to the evaluation of a new GDP, of the order of 1,500 billion euros in 2019.

WP 2022.08 Crop Prices and Deforestation in the Tropics

Published in Journal of Environmental Economics and Management (2023), 119: 102819,

Nicolas Berman – Mathieu Couttenier – Antoine Leblois – Raphael Soubeyran

Abstract
Global food demand is rising, driven by a growing world population and dietary changes in developing countries. This situation encourages farmers to increase crop production which, in turn, increases worldwide demand for agricultural land and the pressure on tropical forests. Given the probability that growth in world food demand will continue, this pressure is not likely to abate in coming decades. While the impact of food demand on deforestation has been in the headlines, rigorous evidence of the relationship between international crop prices and deforestation using large-N data remains scarce. We attempt to quantify this link during the twenty-first century using high-resolution annual forest loss data for tropical regions, combined with information on crop-specific agricultural suitability and annual global commodity prices. We find that price variation has a sizable impact on deforestation: crop price increases are estimated tobe responsible for a third of the total deforested area in the tropics (approx. 2 million km²) during the period 2001-2018. We also find that the degree of openness to international trade and level of economic development are first-order local characteristics affecting the magnitude of the impact of crop prices on deforestation.

WP 2022.07 Do forest conservation policies undermine the soybean sector in the Brazilian Amazon? Evidence from the blacklisting of municipalities

Léa Crepin

Abstract
Minimizing the trade-offs between agricultural production, development and forest conservation is key to ensure that conservation policies can achieve long-term impacts. Taking the case of the Brazilian Amazon in the context of the Action Plan for the Prevention and Control of Deforestation in the Legal Amazon, we estimate the impact of the blacklisting of municipalities with high deforestation risk on soybean production (a major driver of deforestation), exports and land-use changes. Difference-in-difference regressions and generalised synthetic control method are first used to determine the impacts of the policy. The triple difference strategy is then applied to explore heterogeneity in the production and export changes across municipalities. We find that, although effective to reduce deforestation, the policy is unlikely to have undermined the soybean production and exports. On the contrary, our results suggest that the soybean sector benefited from the changes in land use following the implementation of the blacklist. However, we do not find evidence that land restriction triggered intensification of soybean production, which suggests that soybean benefited from an intra-crops reallocation.

WP 2022.06 Controlling an infectious disease and sustainability: lessons from Hartwick’s Rule

Can Askan Mavi – Benteng Zou

Abstract
This paper tries to understand how a pandemic disease changes the relationship between different production factors such as labor, capital and natural resource extraction under maximin criterion, that consists of providing a constant utility to each generation over time. We show that the prevention policy plays an important role to implement an optimal and sustainable economy. We also show that a public policy such as lockdown or social distancing may decrease or increase the natural resource extraction, depending on the cost of the public policy. Understanding these opposite cases is crucial to know how to create a sovereign wealth fund (i.e, capital accumulation) that is composed by natural resource rents. Another important result is that in an economy facing a pandemic, an increase in natural resource extraction does not mean a direct increase in capital accumulation as documented in the existing literature. In this sense, we also challenge the well-known Hartwick rule’s “all resource rents invested in capital accumulation” idea.

WP 2022.05 Valuation of Ecosystem Services and Social Choice: The Impact of Deliberation in the context of two different Aggregation Rules

Forthcoming in Social Choice & Welfare

Mariam Sy – Charles Figuières – Hélène Rey-Valette – Richard Howarth – Rutger De Wit

Abstract
This paper describes an empiric study of aggregation and deliberation – used during citizens’ workshops – for the elicitation of collective preferences over 20 different ecosystem services (ESs) delivered by the Palavas coastal lagoons located on the shore of the Mediterranean Sea close to Montpellier (S. France). The impact of deliberation is apprehended by comparing the collectives preferences constructed with and without deliberation. The same aggregation rules were used before and after deliberation. We compared two different aggregation methods, i.e. Rapid Ecosystem Services Participatory Appraisal (RESPA) and Majority Judgement (MJ). RESPA had been specifically tested for ESs, while MJ evaluates the merit of each item, an ES in our case, in a predefined ordinal scale of judgment. The impact of deliberation was strongest for the RESPA method. This new information acquired from application of social choice theory is particularly useful for ecological economics studying ES, and more practically for the development of deliberative approaches for public policies.

WP 2022.04 Why health matters in the energy efficiency–energy consumption nexus? Some answers from a life cycle analysis

Published in The Energy Journal (2023), 44:

Sondès Kahouli – Xavier Pautrel

Abstract
This paper shows that accounting for the growing interdisciplinary literature supporting the causality between energy efficiency and health and the empirical evidence re-assessing the importance of health in workforce productivity, could explain a part of the paradoxal relationship found between energy efficiency and energy consumption.
We build a 3-period overlapping generations model where we assume that residential energy inefficiency induces chronic disease for adults and bad health for elderly. We also assume that workers’ health has an effect of their labor productivity. Our results suggest, in particular, that if mostly old (respectively young) people health is affected, the health impact of residential energy efficiency should have a backfire (resp. rebound) influence on residential energy consumption, by promoting precautionary saving (resp. by rising labor productivity).
In policy terms, by showing that the link between energy efficiency and energy consumption is far from being just associated with technical conditions about preferences and/or production technology, our research emphasizes how crucial and complex are for governments the discussion and policy action dealing with the connection between energy conservation policies, health insurance system and growth.

WP 2022.03 Carbon Footprints, Traded Emissions and Carbon-Price Cooperation Equity

Dominique Bureau

Abstract
Existing gaps between territorial inventories of CO2 emissions and carbon footprints resulting from the final domestic demands of countries highlight the need to reduce imported emissions in developed countries. Generalized carbon border pricing would help but it requires avoiding the risk of its use as a trade barrier. However, such an import tax is not the unique possible approach and it is not a substitute for enhanced climate cooperation.
In addition to the advantages usually put forward in terms of efficiency and mechanism design, the setting of a common carbon price, by the means of national taxes or a cap and trade mechanism, would present a threefold interest in this context: of discarding the objections of trade distortions against climate policies; of regulating imported emissions and internal emissions with the same level of ambition; and of acting both on the use of products as well as on their processes. Footprint taxation is then unnecessary, except with non-participants.
But a Green Fund is needed for fair sharing of the burden of the efforts. Moreover, its rules must be adapted when integrating trade-related emissions, which has not been pointed out so far in the debates on Article 6 of the Paris Agreement. Corresponding conditions are specified here and it is underlined that this approach has also the advantage having to deal only with the net distributive effects involving trade in carbon.

WP 2022.02 Drought exposure and accuracy: Motivated reasoning in climate change beliefs

Published in Environmental and Resource Economics (2023), 85: 649–672

Guglielmo Zappalà

Abstract
Despite scientific consensus, there is no unanimity among individuals in the beliefs about climate change and its consequences. Understanding how people form these beliefs and what drives their interpretation of climatic events is essential, especially in developing countries and among agricultural communities, which may most suffer the consequences of climate change. Using survey data from rural households in Bangladesh together with a meteorological measure of excess dryness relative to historical averages, this paper studies how long-term average exposure to dryness and short-term deviations shape beliefs of increase in droughts and the interpretation of drought events. To explore how agents interpret past droughts, I use an instrumental variable approach and investigate whether individual beliefs lead to distortions of objective information in an asymmetric manner. The results show that individuals’ interpretation of droughts is biased in the direction of their prior beliefs, providing suggestive evidence of confirmation bias as a directional motivated reasoning mechanism. The findings highlight the need for models that account for behavioral factors to study climate change beliefs and their implications for effective communication and adaptation policies.

WP 2022.01 Local economic development through clean electricity generation – an analysis for Brazil and a staggered difference-in-difference approach

Swaroop Rao – David Grover – Dorothée Charlier

Abstract
Adaptation of energy systems worldwide to move away from fossil fuels is widely accepted to be a key step in responding to the challenge of climate change. For developing countries and their development banks, this challenge is compounded by the need to ensure economic development, particularly to lift parts of the population out of poverty. In this article, we analyse the economic impacts of electricity generation projects of the Brazilian national development bank. We use a two-way fixed-effects (TWFE) estimator on a 15-year municipality-level panel with time-varying (or “staggered”) treatment that accounts for recent findings in the panel data analysis literature. Our study finds that clean electricity generation has weaker economic effects compared to fossil electricity generation and compared to other projects of the development bank. This differentiated impact is particularly notable when it comes to the impact of investment on employment creation and wage levels. This is the first study that uses microdata to analyse the different economic impacts of clean electricity generation and fossil electricity generation at the local level. We posit that differences in labour intensities of clean electricity generation jobs and the jobs created by fossil electricity generation as well as other types of development bank investment account for these different impacts of project investments. We recommend that the cost of externalities of these projects be internalised in order for development banks and policymakers to get a fuller picture of the benefits brought about by them. Smaller economic impacts of certain development bank investments might also have negative implications for poverty reduction efforts in the country.