Pascale Champalaune

Pascale Champalaune

PhD Candidate at PSE

Research

Working Papers

Abstract Denser cities are more productive and offer higher wages, through agglomeration externalities. But urban density may also bring about higher local air pollution, which can either be compensated for via higher wages (as a consumption disamenity), or have negative productivity effects, leading to lower wages (as a production disamenity). This paper studies how air pollution affects wages across French cities, and whether it enhances, or instead attenuates, nominal wage differentials (the urban wage premium) and real wage differentials. Using panel data over the 2002-2018 period and a double instrumental variable strategy to tackle endogeneity concerns, I first confirm that density does foster fine particulate matter (PM2.5) concentration. Then, I show that as wages react negatively, nominal wage gains from agglomeration are lower on average due to local air pollution. Interestingly, real wages also negatively affected. Relying on the structure of a spatial equilibrium model, I show that this is because local air pollution is an even stronger production disamenity than it is a consumption disamenity: while PM2.5 impairs productivity even at low levels, compensation only kicks in for the largest, most polluted cities. There is also heterogeneity by skill, as high-skill workers receive a larger compensation for air pollution than low-skill ones.

Next presentation : EAYE 2025 at King’s College London, 29-31 May 2025

Abstract I combine measures of neighbourhood characteristics with high-resolution remote-sensing data to provide the first national-scale study of cross-sectional and longitudinal inequality in exposure to fine particulate matter (PM2.5) in France. First, descriptive evidence reveals a U-shaped relationship between income and PM2.5 exposure at the national level. However, within urban areas, poorer neighbourhoods are overexposed - a finding confirmed by fixed-effect models. In addition, longitudinal inequality measures suggest that, in relative terms, recent air quality improvements accrued predominantly to areas that had a lower initial exposure, and intermediate income. In a second step, I exploit a change in air quality schemes at the level of urban areas in an event-study framework, so as to shed light on potentially unequal benefits from the induced reduction in exposure. I argue that paying specific attention to the issue of spatial autocorrelation is particularly important in a setting where the dependent variable is spatially continuous, and thus control for a spline of census-block geographic coordinates in preferred specifications. Results suggest that the adoption of new air quality schemes accounted for about a third of the drop in exposure over the period. I find that initially higher-income areas experienced larger improvements than lower-income ones, and that suburbs received larger improvements than city centres. This last finding hints at differences in the relative effectiveness of the measures taken to improve air quality.

Work in Progress