If air pollution harms innovation - and therefore future productivity - existing assessments of its economic cost are incomplete. We estimate the effect of fine particulate matter concentration on inventive output in 977 European regions. Exploiting thermal inversions and weather-induced ventilation of pollutants for identification, we find that a decrease in air pollution equivalent to the average yearly drop in Europe leads to 1.2% more patented inventions in a given region. A back-of-the-envelope calculation suggests that accounting for the effect on innovation increases the economic cost of air pollution as assessed in prior work by about three quarters.

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6 March 2025

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Journal of Environmental Economics and Management 1302025

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DOI: 10.1016/j.jeem.2024.103102

https://www.sciencedirect.com/science/article/pii/S0095069624001761

This Journal article is published under the centre's Growth programme.