Dirty Money: Is there a Wage Premium for Working

in a Pollution Intensive Industry?

Matthew A. Cole*

Robert J. R. Elliott*

Joanne K. Lindley**

Abstract:

Within a compensating wage differential framework we investigate whether there is a wage premium for working in a pollution intensive industry.  Our results for the economy as a whole suggest that there is a small wage premium of approximately one half of one percent associated with the risk of working in a dirty job.  This premium rises to approximately ten percent for those individuals who work in one of the ten dirtiest industries.  There is also some evidence that existing levels of pollution affect the size of the pollution exposure-wage elasticity that is suggestive of a threshold type effect of pollution on wages.

Keywords: Compensating Wage Differentials, Pollution, Value of Statistical Life.

JEL: J28, J31, Q52.

Acknowledgements:

Matthew Cole and Robert Elliott are grateful for funding from the Leverhulme Trust grant number 12345.  We would like to thank Steve McIntosh and participants at the University of Sheffield and University of Birmingham for useful comments.

* Department of Economics, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK.

** Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield, S10 2TN, UK..

Corresponding author: Robert Elliott, Department of Economics, University of Birmingham, Edgbaston, Birmingham, B15 2TT, UK. [email-masked]. Tel: (44) 0121 4147700