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As of 2014, urban population accounted for 54% of total global population and it is expected to grow by approximately 1.6% per year between now and 2030. According to the urban economics literature, the increase in city sizes is associated with welfare enhancing agglomeration effects but also with stronger congestion forces. One of these congestion forces is air pollution, which has adverse effects on human health, productivity and well-being. This project aims to study the potential causal link between urban compactness and pollution concentration in the United States.

Our research question is motivated by a frequent claim by urban planners (often associated with the Smart Growth approach to planning) that urban compactness decreases greenhouse gas emissions and is therefore “greener”. Even if this is indeed the case, greenhouse gas emissions are only one aspect of urban air pollution. The causal effect of urban compactness on local air pollution concentrations, which is the other aspect of urban air pollution, has been surprisingly overlooked. This is of particular importance as recent figures suggest that ambient air pollution leads to 400,000 premature deaths in Europe every year. In this project this causal link will be analysed using novel data sets (including satellite based pollution measures) in conjunction with various statistical techniques (such as instrumental variables) to overcome confounding factors. More specifically, this empirical strategy is based on exploiting geological characteristics, such as the presence of underground aquifers or earthquake risks, which affect population density within cities but are otherwise orthogonal (statistically independent) to air pollution. This project will also aim to directly estimate the health effect and provide a back-of-the-envelope calculation of the associated costs (or savings).