NEW YORK – Poor air quality can damage not only your health but also your productivity as measured by your willingness to sit down and trade in the stock market. According to a new study by professors at Columbia Business School and Leibniz Universität Hannover, there is a direct link between higher levels of air pollution and a reduction in investor trading activity. The research, entitled Fresh Air Eases Work, suggests that even the relatively low levels of air pollution now seen in the developed world can have a serious impact on productivity.
Based on detailed data tracking individual investor behavior and air pollution, the study shows that:
Individual investors are less likely to log into and trade in their online brokerage accounts when air quality worsens, and vice versa.
Since trading requires both skill and intellectual ability, the authors argue that it can be taken as a proxy for white-collar work productivity.
The effects are large: in perspective, a one-standard-deviation increase in fine particulate matter reduces trading activity by 8.5% the same magnitude as a one standard deviation increase in sunshine.
Individual productivity translates into individual wages and thus wealth. Consequently, the research suggests that the negative impact of air pollution on workplace performance and the economy at large is far more widespread than previously believed.
“To my knowledge, this is the first study to demonstrate a negative impact of pollution on a measure of white collar work productivity at the individual level in western countries,” said Columbia Business School Professor Michaela Pagel, a co-author of the research. “And the rather frightening conclusion is that even relatively invisible fine air particular matter damages cognitive ability by moving through the nose to the brain. We hope it serves as motivation for both corporate leaders and elected officials to focus on air quality control and improvement efforts.”
NEW FINDINGS BUILD ON EXISTING BODY OF EVIDENCE
Building on previous studies showing that pollution levels impact everything from productivity in physically arduous jobs and short-term variations in major stock market indexes to student exam performances and baseball umpire game calls, the research sounds a warning for the major economies in Western Europe and North America. There, while air pollution is not commonly seen as a problem, it may still have a major negative impact on overall economic output.
This is particularly true in Germany where the authors obtained their raw data for the study. The researchers used highly detailed hourly air pollution levels from 600 air, weather and traffic stations and tracked that information to local zip codes. Against this, they obtained online account trading activity and customer demographics from a large German discount broker and correlated that activity with air pollution. The professors found that even though many air pollutants have decreased in recent decades across the region – in many cases to the point that pollution is no longer considered a problem – the evidence shows a marked impact in trading activity.
To learn more about the cutting-edge research being conducted by Columbia Business School researchers, visit www.gsb.columbia.edu.
About Columbia Business School
Columbia Business School is the only world-class, Ivy League business school that delivers a learning experience where academic excellence meets with real-time exposure to the pulse of global business. Led by Dean Glenn Hubbard, the School’s transformative curriculum bridges academic theory with unparalleled exposure to real-world business practice, equipping students with an entrepreneurial mindset that allows them to recognize, capture, and create opportunity in any business environment. The thought leadership of the School’s faculty and staff members, combined with the accomplishments of its distinguished alumni and position in the center of global business, means that the School’s efforts have an immediate, measurable impact on the forces shaping business every day. To learn more about Columbia Business School’s position at the very center of business, please visit www.gsb.columbia.edu.
About the researcher
Michaela Pagel is the Roderick H. Cushman Associate Professor of Business at Columbia Business School. She received her Ph.D. from the Economics...Read more.