Paola Sapienza (Alesina Seminar)

Today's Speaker

Paola Sapienza (Northwestern), "Measuring the Long-Term Impact of Environmental Externalities”

Abstract

We exploit a unique dataset of the Danish population observed over more than four decades to measure the long-term health effects of toxic pollution. In advanced economies, firms creating pollution externalities have incentives to underestimate long-term health costs. Making use of incinerators' openings and closings in Denmark, we explore the interactions between cumulative exposure and latency as determinants of lung cancer incidence. The health impact of an incinerator becomes significantly larger 20 years after opening and persists long after closing. An average amount of cumulative exposure increases the risk of lung cancer by over 5 basis points, doubling existing probability estimates from short-term analyses of pollution. The decade-long latency we document implies that standard cost-benefit analyses used in environmental regulation, which rely on contemporaneous effects, severely underestimate true health costs. Using age-specific income and wealth quintiles to disentangle aging from socioeconomic status effects, we find that the health impacts are consistently stronger among lower-income and lower-wealth individuals. Our findings suggest that regulatory frameworks that fail to account for long term effects may systematically undervalue the social costs of pollution, particularly for older and economically disadvantaged populations.

Co-sponsored by FAS and IQSS, the Alberto Alesina Seminar on Political Economy supports research-related activities that integrate the study of economics and politics, whether by studying economic behavior in the political process or political behavior in the marketplace. In general, positive political economy is concerned with showing how observed differences among institutions affect political and economic outcomes in various social, economic, and political systems and how the institutions themselves change and develop in response to individual and collective beliefs, preferences, and strategies.

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All interested faculty and students are invited to attend.