Ambient air pollution and consumer spending: Evidence from Spain

Area of Science:

• Environmental Economics
• Public Health
• Consumer Behavior

Background:

• Economic research on air pollution primarily addresses macroeconomic effects.
• Studies indicate air pollution can trigger avoidance behaviors, like reduced outdoor activity.
• The impact of air pollution on consumer spending remains under-researched.

Purpose of the Study:

• To investigate the association between air pollution and consumer spending in Spain.
• To determine if ozone and fine particulate matter influence daily retail spending.
• To explore potential heterogeneity in this relationship across age groups.

Main Methods:

• Utilized high-frequency data on ozone and fine particulate matter concentrations.
• Combined pollution data with daily brick-and-mortar retail spending data for 129 Spanish postal codes in 2014.
• Employed a linear fixed effects model to estimate the association between pollution levels and spending.

Main Results:

• A 1-standard deviation increase in ozone concentration was linked to a 3.9% decrease in consumer spending (p<0.01).
• No statistically significant association was found between fine particulate matter and consumer spending (p>0.10).
• The negative impact of ozone on spending showed no significant short-term bounce-back effect and was more pronounced in individuals under 25 and over 45.

Conclusions:

• Ozone pollution has a discernible negative impact on consumer spending, even at levels below WHO guidelines.
• This finding suggests an unaccounted economic cost of air pollution affecting retail activity.
• Policymakers should consider these consumer spending impacts when addressing air quality regulations.