What are the long-term economic effects of pollution?

The eastern parts of cities like London, Paris and New York are more deprived than neighbourhoods to the west. These higher levels of poverty today can be linked back to pollution levels during the time of industrialisation.

We’ve all heard the stories of poverty and hardship from the east side of the metropolitan and industrialised cities of London, Paris and New York. Many have recently become the focus of media attention as a result of rapid gentrification.

But why were eastern neighbourhoods poorer, and why did some gentrify while others did not? The explanation lies in the air pollution emitted by the coal-burning factories of the industrial era.

While contemporaneous effects of air pollution are well understood today – research finds that air pollution has negative effects on human health, labour productivity and cognitive abilities – less light has been shone on the lasting effects of historical pollution. This article focuses on the indirect impact of pollution on the composition and structure of cities, and briefly discusses the more direct and long-run effects on health.

The rise of pollution

Economic development and per capita growth took off with the Industrial Revolution as production moved from homes to factories, and new energy sources – first water, then coal – were powering the engines of growth day and night.

During this time, large industrial towns such as Manchester experienced unprecedented levels of production growth, which sadly came with equally high social costs. Workers were forced to live and work under terrible conditions, and cities experienced a steep rise in air pollution from the ever-growing number of coal-fired factories and furnaces.

In Manchester, the number of factory chimneys increased from 500 in the 1840s to around 2,000 at the end of the century (Mosley, 2008). In line with this, Figure 1 shows a steep increase in total coal consumption during the 19^th century.

Charles Dickens described the pollution of this period as ‘smoke lowering down from chimney-pots, making a soft black drizzle, with flakes of soot in it as big as full-grown snowflakes – gone into mourning, one might imagine, for the death of the sun.’

Suffice to say, these conditions had adverse effects on individual health. For example, it is estimated that industrial coal use in Britain over the decade 1851-60 explains about one-third of the urban mortality penalty, with children under the age of five being most affected (Beach and Hanlon, 2018).

Among working age individuals, mortality is linked to respiratory diseases like tuberculosis. But in the early days of industrialisation, the working class perceived smokeless chimneys as the bigger threat since closed factories would bring hunger and starvation. ‘What cannot be cured must be endured, without grumbling, for it is the lesser evil than putting out the furnaces and fires’,was the pragmatic conclusion drawn by William Nicholson, Chief Smoke Inspector in Sheffield (cited in Mosley, 2008).

The fall of pollution

With time and growing incomes, the willingness to accept skies darkened by coal smoke declined. When yet another London fog event trapped coal smoke in the city in 1952, killing nearly 4,000, it accelerated the introduction of limits on air pollution, with the UK’s first Clean Air Act introduced in 1956 (Hanlon, 2019, provides a more detailed discussion of events around the London fog).

As Figure 1 shows, this legislation triggered a visible reduction in coal use, as coal-fired plants were banned from city centres. Yet it was not until a second Clean Air Act in 1968 that coal use truly plummeted.

Figure 1: Coal consumption, 1750-2000

Source: Author’s calculations based on data from Warde, 2007
Note: Warde reports coal consumption in petajoule; to convert numbers from petajoule to tons, a conversion factor of 1:34,140 is used.

Just as structural change was wiping out the remnants of Britain’s industrial past, the country positioned itself as a global leader in enacting environmental legislation. Since that time, many other countries have followed suit, and research has shown the positive effects on individual and ecosystem health (Currie and Walker, 2019; Schmalensee and Stavins, 2019).

Initially, most clean air acts looked to reduce airborne particulate matter and other common emissions pollutants, including ozone and sulphur dioxide, to improve air quality and reduce negative health effects. As a side effect, regulation (for example, of coal-burning power plants) has also contributed to a reduction in the greenhouse gases that cause climate change.

With a rising awareness that such emissions are linked to global warming, air pollution targets now focus on pollutants that damage human health and the environment.

The long shadows of historical pollution

Historical pollution from industrial coal use can have lasting effects. At the individual level, there is rising evidence that exposure to air pollution during pregnancy has negative effects on later life outcomes for the baby. The causal chain suggests that exposure has birthweight effects, which, in turn, affects later schooling and employment outcomes. Past pollution exposure from 20 or more years prior can also have persistent long-run effects on mortality.

Besides connecting early individual exposure to negative outcomes later in life, persistent global warming also teaches us about the important intergenerational effects of air pollution. Historical pollution remains in the atmosphere, linking the rise of global temperatures today to the heyday of past industrialisation.

Comparing levels of carbon dioxide in the atmosphere before the Industrial Revolution with today shows that carbon dioxide levels have risen by more than 40% from 280 parts per million (ppm) in the mid-1700s to around 410ppm in 2019. This is the result of 1.5 trillion tons of emissions, nearly half of which has been emitted by the United States (25%) and Europe (22%).

The rise of extreme weather events over the past year has made us increasingly aware of the social costs of greenhouse gas emissions and their long-term effect on future generations’ wellbeing, security and public health.

Another long-run effect of pollution, which is less prominent though equally detrimental, is the unequal impact on different neighbourhoods, and therefore the households within them. Historical location choices have affected the composition, organisation and development of cities for decades afterwards.

Looking at Victorian England shows that the prevailing winds in the northern hemisphere (what are known as westerlies, which blow from the west to the east) caused differential exposure to coal smoke. This caused neighbourhood sorting with rich people moving to the relatively less polluted west side of cities and poor people residing in the eastern parts (Heblich et al, 2021).

Reconstructing atmospheric pollution and neighbourhood composition at a precise geographical level from historical Ordnance Survey maps has identified industrial chimneys as the main pollution sources (Figure 2 illustrates the level of detail).

The chimneys of Victorian England were not very tall compared with modern standards, and the coal was burned at a lower temperature. As a result, coal pollution was highly localised – but it did not spread out evenly. Specifically, westerly winds directed pollution exposure predominantly to the east. Consequently, the eastern Mancunian neighbourhood of Ancoats was far more polluted than contemporary Beijing, while others like Davyhulme were below modern pollution limits.

Figure 2: Ordnance Survey maps (1880)

Source: Heblich et al, 2021

These pollution disparities are directly linked to neighbourhood composition: polluted neighbourhoods showed significantly higher shares of low-skilled workers at the end of the 19^th century. Since this correlation was absent before coal became the major energy source at the beginning of the century, it is causally linked to the rise of industrial pollution.

The observed effect is substantial: the difference between being in the 10% and 90% most polluted neighbourhoods of Manchester was a difference of about 20 percentage points in the share of low-skilled workers. Most strikingly, the relationship between the presence of historical pollution and the share of low-skilled workers in 2011 turns out to be quantitatively comparable to the one observed at the end of the 19^th century.

Smoke abatement and the persistence of segregation

This still leaves one question unanswered. How could the effects of 1880 pollution on different neighbourhoods be visible nowadays, nearly a century after the 1926 Smoke Abatement Act, aimed at reducing pollution from industrial coal smoke, and 50 years after the Clean Air Act?

While the average correlation between (past) air pollution and the share of low-skilled workers in 2011 was almost as large as at the end of the 19^th century, this new observation masks important differences.

In neighbourhoods where past pollution levels were close to the city average (either slightly lower or higher), social segregation ceased with the introduction of the clean air acts. For example, a city like Bristol, with low overall levels of pollution and where all neighbourhoods were close to the city average, does not display pronounced west-east differences in outcomes today.

By contrast, neighbourhoods where past pollution was well above or well below the city average (mostly present in cities like Manchester with high average pollution) are locked in their historical equilibrium. These differences in the persistence of neighbourhood composition are shown in Figure 3.

This illustrates the existence of ‘tipping dynamics’: past a certain threshold, a poor neighbourhood repels richer residents even when the original negative characteristics – for example, pollution – have long waned.

Further analysis of neighbourhood composition today suggests that the persistence is related to (the lack of) work opportunities, school composition, higher crime incidences and a lower quality of the housing stock. The combination of social composition and durable investments sustained the historical effects of pollution past their due date set by the clean air acts.

Figure 3: Pollution across neighbourhoods and shares of low-skilled workers in 1817, 1881, 1971, 1991 and 2011.

Source: Heblich et al, 2021

Why does this matter?

Let us go back to the original question. Why are the east sides of post-industrial cities so poor?

Research suggest that they are poor because of the high levels of pollution during the industrial age, the tendency for the smoke to drift toward the east, the associated neighbourhood sorting and the persistence of segregation in very poor districts.

In American cities like Chicago, these effects may literally be cemented if highways impose a physical barrier between eastern and western parts. In other locations, initial differences have been further exacerbated by discriminatory policies like ‘red-lining’, a practice in which areas with sizable African-American populations were outlined in red ink on maps to warn mortgage lenders.

What implications do these findings hold for urban policies today?

The East Side Story has implications for both developing and developed countries. In countries like China or India, air pollution presents a major challenge with pollution levels today being similar to those in industrialising Britain. Beside the well-documented health effects discussed above, uneven pollution exposure across space may also create spatial inequalities that will cast long-lasting shadows into the future.

Second, many developed economies employ costly urban policies to revive deprived areas, triggering new housing opportunities and business investment. The research for England shows a remarkable stickiness of historical compositions, which require a sizable push to bring neighbourhoods beyond a certain threshold. One such example was the development of East London for the 2012 Olympic Games.

While this is clearly an extreme case, access to data on public spending targeted towards urban renewable programmes would provide valuable insights into the size of the push that is necessary to leave the past behind.

Where can I find out more?

Air pollution's hidden impacts: Joshua Graff Zivin and Matthew Neidell discuss the effects of regulation on air pollution and associated health effects.
The mortality and medical costs of air pollution: Evidence from changes in wind direction: Research on the estimated life years lost due to pollution exposure.
The impact of pollution on worker productivity: Study highlighting that ozone levels well below federal air quality standards have a significant impact on productivity.
Air pollution as a cause of violent crime: Evidence from Los Angeles and Chicago: Comparing local data to show the impact of air pollution on the incidence of criminal activity.
The long-run economic consequences of high-stakes examinations: Evidence from transitory variation in pollution: Avraham Ebenstein, Victor Lavy and Sefi Roth discuss the negative effect of exposure to particulates on student performance.
Airports, air pollution, and contemporaneous health: Study showing the health effects of carbon monoxide exposure from proximity to airports, including asthma, respiratory illness and heart conditions.
Atmospheric pollution, health and height in late nineteenth century Britain: Research into the effects of emissions of black smoke on child development.