Structural Transformation and Environmental Externalities (wtih Maulik Jagnani and Hemant K. Pullabhotla)

Even as policymakers seek to encourage economic development by addressing misallocation due to frictions in labor markets, the associated production externalities – such as air pollution – remain unexplored. Using a regression discontinuity design, we show access to rural roads increases agricultural fires and particulate emissions. Farm labor exits are a likely mechanism responsible for the increase in agricultural fires: rural roads cause movement of workers out of agriculture and induce farmers to use fire – a labor-saving but polluting technology – to clear agricultural residue or to make harvesting less labor-intensive. Overall, the adoption of fires due to rural roads increases infant mortality rate by 5.5% in downwind locations.