Columbia Study Illuminates Surprising Link Between Air Quality and Economic Output

Air quality and stock profits may not seem like there is an obvious correlation, but a new study may have found one. The Columbia Business School recently discussed the link between “higher levels of air pollution and a reduction in investor trading activity,” drawing a striking connection between air pollution and overall economic output in the developed world.

In the new study entitled “Fresh Air Eases Work,” Columbia Business School professor Michaela Pagel, who co-authored the study along with researchers from Leibniz University in Hanover, Germany, tracked “highly detailed hourly air pollution levels from 600 air, weather and traffic stations” and “online account trading activity and customer demographics from a large German discount broker.”

Piggybacking on previous research that correlated air pollution with everything from “short-term variations in major stock market indexes” to “baseball umpire game calls,” the researchers correlated the two data sets and found that “the negative impact of air pollution on workplace performance and the economy at large is far more widespread than previously believed.”

The study found that when air quality worsens, investors are “less likely to log into and trade in their online brokerage accounts.” According to the study, a “one-standard-deviation increase in fine particulate matter reduces trading activity by 8.5 percent the same magnitude as a one standard deviation increase in sunshine.”

Pagel concludes, “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.”