Economic History Seminar - Maria Waldinger (IFO Institute Munich)
Title: The Revolution Suffocates Its Children - The Short- and Long-Term Effects of Air Pollution in Socialist East Germany
Abstract: Measuring the detrimental effects of air pollution on individuals is difficult. In this paper, we overcome this challenge by leveraging a natural experiment occurring in socialist East Germany in the 1980s. Suddenly and unexpectedly, the Soviet Union reduced and capped East Germany’s access to imported fossil fuels, leading the socialist party dictatorship to rapidly substitute Soviet oil with domestic brown coal at the cost of increased ambient air pollution. Comparing regions within East Germany with and without natural brown coal deposits, we find that the switch to brown coal led to an immediate and permanent increase in mortality (?), infant mortality and a reduction in birth weights. We use administrative social security data after German reunification to show that, in the next 40 years, individuals that lived in areas within the GDR exposed to the shift to brown coal spent less time in employment, earned lower wages and retired earlier. The authoritarian nature of the East German government makes this natural experiment particularly insightful by ruling out spatial sorting behaviour, competitive housing markets, and labour market adjustments as channels through which the estimated effects of air pollution could have been confounded.