The impact of environmental pollution on labor supply: empirical evidence from China.

The current study focuses on determining mediating effect using the fixed and instrumental variable models to understand how PM affects labor supply. To approach study objectives, a 20-year dataset (from 2000 to 2019) of 287 Chinese prefecture-level cities were collected. To deal with potential endogeneity, the ventilation coefficient was used as an instrumental variable to identify the reverse causality between PM and labor supply. Results depicted that the PM pollution significantly and negatively impacts the labor supply. It was found that PM indirectly reduced labor forces because of pollution-induced health losses. Moreover, when the pollution level was above 30 μg/m, the PM significantly reduced the labor supply. The result suggests that China's local and national governments should enact stringent policy measures to reduce air pollution.