1

The Effect of Social and Economic Development on Air Pollution in Indian Cities





Matthew J. Holian
*



August 2, 2013




Abstract

This paper presents new estimates of air pollution production functions using
data from Indian cities. The resulting estimates enable tests of various
hypotheses concerning the effect of income, literacy, population and other
variables on four measures of air pollution: sulfur dioxide, nitrogen dioxide, and
two measures of particulate matter. Controlling for multiple factors, we find the
relationship between social and economic development and pollution varies
across pollution type and development indicator; we find a negative relationship
between income and particulate matter, no relationship between income and
sulfur dioxide emissions, and a positive relationship between income and
nitrogen dioxide emissions. We also test for nonlinear relationships, but do not
find strong non-monotonic relationships between income and pollution, though
there is some evidence for non-monotonic relationships between literacy and
pollution. We present new population elasticity estimates, and document large
variation in air pollution levels across regions and industries.




Keywords: urban air pollution, India, environmental Kuznets curve, economic and social
development



*
Associate Professor, Department of Economics, San Jose State University, One Washington Square, San Jose,
California, USA, 95192. Phone: 408-924-1371. Fax: 408-924-5406. Email: matthew.holian@sjsu.edu. I thank Sahil
Gandhi, Matthew Kahn, Kala Seetharam Sridhar and audiences at IIHS Bangalore and CSU East Bay for helpful
discussions related to this project. Anand Saxena and Haziq Siddiqi provided valuable research assistance. This
research was supported by a RSCA grant from the California State University and by a grant from the College of
Social Sciences at SJSU. I alone am responsible for any errors.
2

Introduction

In 2011, 31 per cent of Indians were officially classified as residing in urban areas. In
contrast, in more developed countries this figure is around 78 per cent, suggesting that as it
develops, India will become substantially less rural than it is today. However the speed at which
India urbanises depends in part on the quality of life in Indian cities. Dangerously high levels of
urban air pollution discourage potential new residents from settling in many cities in the
developing world. This has the effect of slowing urbanisation, encouraging emigration among
the highly skilled, and lowering economic growth.
1

The goal of this study is to understand the determinants of pollution levels among
medium-sized and large Indian cities. Our primary approach is to estimate pollution production
functions for four measures of ambient air pollution: sulphur dioxide, nitrogen dioxide, and two
measures of particulate matter. We combine several high-quality data sources, which enable
tests of various hypotheses concerning the effect of income, literacy, population and other
variables on pollution levels. Given the disagreement among researchers on appropriate
proxies for average income at the local level, we study the effect of two different income
measures, as well as literacy, a proxy for social development. Understanding how key variables
relate to pollutionand how to measure these key variablescontributes to the work of
scholars in a variety of disciplines, and of policy makers seeking to improve urban quality of life.
Economic growth is fuelled by urbanisation and can lead to environmental degradation.
Emissions from factories are a clear example. However wealth generated through this process
also leads to environmental improvements. Paving formally dirt roads lowers particulate
matter levels, as does converting home heating and cooking fuels from biomass to greener
3

sources. The tension between growth and the environment has been the focus of many
scholars, and our results contribute to this literature.
Controlling for multiple factors, we find the relationship between social and economic
development and pollution varies across pollution type; we find a negative relationship
between development and particulate matter, no relationship between development and
sulphur dioxide emissions, and a positive relationship between development and nitrogen
dioxide emissions. We also test for non-monotonic relationships, and find some evidence that
pollution levels at first increase and eventually decrease with rising literacy. We also provide
elasticity estimates of the magnitude by which air pollution levels increase with city size and
compare them to findings from previous studies. Other noteworthy findings include a
significant South effect, where some pollution measures are found to be markedly lower in
this region of the country. Finally, we briefly consider the effect of industry type on the four
pollution measures, suggesting which industry types are most correlated with emissions; output
in most industries is positively correlated with sulphur dioxide and nitrogen dioxide emissions,
but is negatively correlated with particulate matter levels.
The remainder of this paper is organised as follows. The next section reviews related
literature. This is followed by a discussion of our data and methodology, which in turn is
followed by a presentation of the results. After a brief section on pollution and industry type,
the conclusion summarises the findings and draws out implications for policy and future work.


4

Literature Review

This study relates to a variety of literatures; we describe three closely related economics
literatures here. The first attempts to rank cities according to their level of pollution. The
second tests the hypothesis that pollution first rises and then falls with development. We
describe a third literature that relates to the first two, but that is specifically related to pollution
in Indian cities. Finally, we briefly discuss work by non-economists to which the present study
closely relates.
The green cities literature describes work that attempts to rank cities according to their
level of pollution, as well as to explain the determinants of varying pollution and its
consequences. Work on this area has focused on cities in the United States (Glaeser and Kahn,
2010) and more recently China (Zheng et al., 2011), and to an increasing extent on cities around
the world.
2
For a recent study focusing on Asia, see Asian Development Bank (2012).
Kahn (2006) summarises economic theories related to growth and pollution in cities.
One of the most important of such theories is the Environmental Kuznets Curve (EKC), which
hypothesises that that initially, economic development increases pollution as the scale of
output increases. However eventually further development leads to offsetting effects; changes
in the composition of consumption and production, technological improvement, and
government regulation all serve to reduce pollution, even as the scale of output continues to
increase. Following Grossman and Krueger (1995), many studies have tested this hypothesis
empirically, with mixed results. Brock and Taylor (2005) summarise this large literature. Many
studies in this literature estimate reduced form production functions like those we present
5

below. However we are not aware of any of such estimates that use city-level data from India,
thus the present study fills this important gap in the literature.
The present study most closely relates to two recent papers. Managi and Jena (2008)
regress an environmental efficiency index on Gross State Product and other variables, and find
it has declined more in high-income states in India. Although their approach is an improvement
over the standard reduced form modelling in the EKC literature, the focus on states rather than
cities limits the applicability of their results for some important purposes. Greenstone and
Hanna (2013) also move beyond reduced form modelling, and measure the causal impact of
pollution regulations on infant mortality rates in India. While the present study estimates
reduced form air pollution production functions, it uses different, arguably superior income
measures. In sum, by analysing geographically more refined units, with better proxies for
average income, the present analysis is complementary to these two closely related studies.
Finally, several studies explore pollution trends in India, and make cross country
comparisons. Gupta and Kumar (2005) document trends in particulate matter in Delhi,
Mumbai, Kolkata and Chennai and find that particulate matter levels have generally fallen over
the period 1991 to 2003; data presented in Sridhar and Kumar (2013) show particulate matter
levels falling by 17 per cent and sulphur dioxide levels falling by 37.6 per cent from 1990 to
2007, but no change in nitrogen dioxide over this period. Gurjar et al. (2007) present pollution
data from eighteen world cities with population over 10 million, including three from India;
while for some measures the Indian cities have below average pollution levels, particulate
matter levels are among the highest.
6

Data and Methodology

Our methodological approach to estimating air pollution production functions is to use
the data described below to estimate the following model using ordinary least squares:

AVGPOLLUTION
i
=
0
+
1
lnPOP
i
+
2
lnRAIN
i
+
3
PCTMANUF
i
+
4
SOUTH
i

+
5
DEV
i
+
6
DEV
i
2
+ u
i
(1)


where, AVGPOLLUTION
i
is the dependent variable and refers to one of the four measures of
pollution (described below) for city i, the independent variables are as described below and are
also at the city level except for income which is measured at the district (county) level, the s
are coefficients to be estimated, and u
i
is an error term with the usual properties. This model is
quite similar to one estimated by Zheng et al. (2010) using data from Chinese cities; for
examples from the United States, see Kahn (1997, 2006).
We estimate several versions of this model. We have four measures of pollution, and
three measures of socioeconomic development, which yields twelve versions of equation (1).
In addition we estimate a restricted version of (1) where
6
is constrained to be zero. As should
be clear, this is to distinguish between linear and nonlinear effects of socioeconomic
development on pollution.
We obtained our data from multiple sources. The four air pollution measures were
taken from the Environmental Data Bank of India's Central Pollution Control Board (CPCB).
3

These include two measures of particulate matter, Suspended Particular Matter (SPM), and
Respirable Particulate Matter (RSPM), the difference between them being particle size;
respirable particles are smaller (less than 10 cubic microgrammes.)
4
The other two air pollution
7

measures are sulphur dioxide (SO2) and nitrogen dioxide (NO2). This data bank allows the user
to download daily pollution data at the level of the monitoring station for over 100 cities and
mainly covers the years 2006 to present. Our study utilizes data from 2006-2011; later in this
section, and in more detail in the Appendix, we describe how we used these data to construct
average pollution estimates for cities.
The main independent variable of interest in equation (1) is DEV
i
, which represents
socioeconomic development. We utilise data from three sources to proxy for socioeconomic
development. The most obvious economic development indicator is income, however average
income data is notoriously difficult to obtain for Indian cities. We therefore collected two
sources of district-level income proxies and assign these to cities based on the district in which
they are located. The first income proxy is monthly per capita consumption expenditure
(MPCE), collected by the National Sample Survey Organisation (NSSO). Chaudhuri and Gupta
(2009) present district-level estimates of MPCE for urban and rural households using data from
a recent NSSO survey; Greenstone and Hanna (2013) used district-level estimates from earlier
NSSO surveys as their city-level income proxies, but the more recent NSSO surveys were
designed to overcome certain deficiencies.
5
For example, we are able to use MPCE for urban
households, while earlier NSSO surveys were not designed to distinguish between urban and
rural households.
The second income proxy is also a district-level measure and is distributed by the
Planning Commission of the Government of India. These consist of District Domestic Product
(DDP) estimates for most but not all districts in India. We have obtained data from the 2004-
2005 study. We use per capita DDP as our second income proxy. We also take advantage of
8

the fact that the DDP data lists output for eighteen industry classifications. In equation (1), the
variable PCTMANUF
i
was calculated using these data; it is total output in manufacturing divided
by total output in all categories in the district in which city i is located.
The third measure used to proxy for DEV
i
, is a measure of social development. We use
the literacy rate which is a city-level measure and is collected by the Census. These three
development indicators are moderately correlated with one another. In our sample, the simple
correlation between DDP and LIT_RATE is 0.34; between DDP and MPCE it is 0.51, and between
MPCE and LIT_RATE it is 0.40.
6

The variable SOUTH
i
is a dummy variable indicating whether or not city i is in the south.
7

This region has higher levels of income and literacy generally, and can therefore itself be
thought of as a development indicator; however we include it mainly to enable estimating the
within-region relationship between social and economic development and ambient pollution.
The final source of data is the 2001 Town Directory, produced by the Census of India, from
which we obtained population and average precipitation measures, the latter a control variable
included in previous studies.
8
We convert both of these variables into natural logarithms
following common practice in the literature.
In calculating average pollution data for cities, we only used estimates from cities for
which the CPCB contained data from at least 365 days. The CPCB describes monitoring stations
as residential, industrial or sensitive; we used data from all of these station types because we
are interested in average city pollution.
9
Table 1 summarises the discussion above by listing the
variables used below, their definitions and the source of the data.

9

Table 1: Variable definitions and sources
Variable Definition Source
AVGSO2 Average sulphur dioxide emissions CPCB
AVGNO2 Average nitrogen dioxide emissions CPCB
AVGRSPM Average respirable particulate matter CPCB
AVGSPM Average suspended particulate matter CPCB
POP City population, 2001 Town Directory (Census)
AVG_RAIN Average precipitation Town Directory (Census)
PCTMANUF Per cent of DDP in Manufacturing Planning Commission, India
SOUTH Regional indicator for cities in South Authors calculation
MPCE Monthly per capita consumption expenditure National Sample Survey Org
DDP Per capita District Domestic Product Planning Commission, India
LIT_RATE Literate fraction of population Census
Sources: (1) Central Pollution Control Board, Environmental Data Bank (accessed 4/15/2012); (2) Town
Directory, produced by the Indian Census Bureau (2001); (3) National Sample Survey Organization's
Consumer Expenditure Survey (2004-2005), as reported by Chaudhuri and Gupta (2009); (4) Planning
Commission, Government of India website (accessed 5/15/2013); (5) 2001 Census, Table 3, Population,
population in the age group 0-6 and literates by sex - Cities/Towns.

Table 2 provides summary statistics for the variables discussed above.
Table 2: Summary Statistics

Variable Obs Mean Std. Dev. Min Max
AVGSO2 64 10.74 6.77 3.60 37.18
AVGNO2 67 25.33 11.43 7.54 59.16
AVGRSPM 68 107.76 54.36 33.26 254.78
AVGSPM 66 224.92 103.10 48.50 463.78
POP 71 1,076,771 1,633,140 103,099 11,978,450
SOUTH 71 0.42 0.50 0 1
AVG_RAIN 71 1183.46 657.55 102.6 3852
PCTMANUF 71 0.16 0.09 0.02 0.55
MPCE 71 1.13 0.37 0.55 1.87
DDP 71 31.15 12.77 12.60 69.68
LIT_RATE 71 67.54 9.43 34.83 86.44
Sources: (1) Central Pollution Control Board, Environmental Data Bank (accessed 4/15/2012); (2) Town
Directory, produced by the Indian Census Bureau (2001); (3) National Sample Survey Organization's
Consumer Expenditure Survey (2004-2005), as reported by Chaudhuri and Gupta (2009); (4) Planning
Commission, Government of India website (accessed 5/15/2013); (5) 2001 Census, Table 3, Population,
population in the age group 0-6 and literates by sex - Cities/Towns.


10

Results


In Table 3 below we begin by presenting the estimates of the restricted version of
equation (1), for each of the four measures of pollution, using each of the three development
proxies. From this table one can see that most of the coefficient estimates on the economic
and social development variables, MPCE, DDP and LIT_RATE, are statistically insignificant.
There are three exceptions. In two of the models that use AVGSPM as the dependent variable,
both MPCE and LIT_RATE are associated with lower levels of pollution. A one standard
deviation increase in MPCE is associated with a fall in average SPM of 22.61 cubic
microgrammes, which is about a one-fifth standard deviation. A one standard deviation
increase in LIT_RATE is associated with a slightly smaller fall in AVGSPM of 21.15 cubic
microgrammes.
The third statistically significant coefficient on a development proxy in Table 3 is on DDP
in the model that uses NO2 as a dependent variable. Unlike the models of particulate matter,
this coefficient estimate is positive. A one standard deviation in DDP is associated with a rise in
average NO2 of 3.2 cubic microgrammes, which is just over a fourth of a standard deviation.
Before discussing the other estimates, we will explore whether the linear (restricted) or
nonlinear (unrestricted) models better fit the data. Comparing the adjusted R2 in Table 3 and
Table 4, we find the linear model is a slightly better fit in seven out of twelve cases. In terms of
statistical significance, none of the coefficients on the development indicators in Table 4 are
significant at the five per cent level, except in one case. In the model where AVGSPM is the
dependent variable and DDP is the development proxy, the negative coefficient on DDP and the
11

positive coefficient on DDP2 suggest there is a U-shaped relationship between DDP and
AVGSPM, with pollution falling until DDP reaches 43.51 and rising after. However, from Table 2
we see that 43.51 is one standard deviation above the mean of DDP. Also, of the 66 cities used
in estimating that model, only eight have a value of DDP above 43.51. Therefore, for most
cities, rising DDP is associated with falling AVGSPM.

12

.
Table 3: Regression Results, Restricted Model
VARIABLES AVGSO2 AVGNO2 AVGRSPM AVGSPM AVGSO2 AVGNO2 AVGRSPM AVGSPM AVGSO2 AVGNO2 AVGRSPM AVGSPM
logPOP 0.987 3.465** 12.23** 38.84*** 0.832 2.821** 12.86** 38.15*** 0.703 3.508** 12.36** 32.35***

(0.609) (1.528) (5.778) (8.715) (0.632) (1.366) (6.114) (9.140) (0.672) (1.623) (5.699) (8.878)
logRAIN 1.946 2.209 -16.09 -23.7 1.259 0.154 -13.56 -29.47* 1.522 2.092 -13.78 -29.08*

(1.232) (2.247) (9.925) (16.600) (1.518) (2.284) (9.247) (16.670) (1.140) (2.116) (8.469) (16.900)
PCTMANUF 27.59*** 38.16*** 110.4** 186.8 26.43** 26.37* 120.6** 218.6* 25.56** 38.51*** 113.9** 160.2

(9.984) (14.240) (49.820) (115.800) (11.580) (15.750) (51.990) (126.600) (10.400) (13.770) (51.010) (111.800)
SOUTH 0.586 -4.141 -64.05*** -122.7*** 0.654 -5.511** -63.52*** -118.1*** 0.996 -4.268 -63.28*** -114.1***

(1.807) (2.672) (9.623) (17.920) (1.757) (2.689) (9.737) (18.800) (2.048) (2.783) (9.709) (18.820)
MPCE -3.049 0.0279 7.282 -61.11**


(1.843) (3.335) (19.260) (25.040)
DDP

-0.00248 0.251** -0.119 -1.158


(0.072) (0.103) (0.475) (0.774)
LIT_RATE

-0.0805 0.0311 -0.175 -2.243**

(0.094) (0.118) (0.456) (0.893)
Constant -17.24* -40.79 57.74 -38.63 -13.66 -23.23 41.82 -28.12 -8.4 -42.64 59.06 169.6

(10.100) (25.460) (104.400) (160.400) (12.470) (23.740) (109.100) (176.300) (13.760) (28.890) (97.150) (163.200)
Observations 64 67 68 66 64 67 68 66 64 67 68 66
R-squared 0.187 0.222 0.483 0.581 0.164 0.279 0.482 0.562 0.174 0.223 0.482 0.586
adj R-squared 0.117 0.159 0.441 0.546 0.0919 0.22 0.44 0.525 0.103 0.159 0.44 0.551
Robust standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1






13


Table 4: Regression Results, Unrestricted Model
VARIABLES AVGSO2 AVGNO2 AVGRSPM AVGSPM AVGSO2 AVGNO2 AVGRSPM AVGSPM AVGSO2 AVGNO2 AVGRSPM AVGSPM
logPOP 0.881 3.231** 14.59*** 38.91*** 0.795 3.086** 12.90* 33.97*** 0.711 3.546** 12.23** 32.34***

(0.669) (1.577) (5.303) (8.912) (0.630) (1.464) (6.520) (9.487) (0.643) (1.611) (5.767) (8.960)
logRAIN 2.003 2.203 -16.71* -23.85 1.231 0.368 -13.54 -31.35* 2.001* 2.656 -10.74 -28.27

(1.262) (2.312) (9.461) (16.960) (1.553) (2.320) (9.241) (17.160) (1.147) (2.181) (8.692) (18.220)
PCTMANUF 27.19*** 37.17** 115.6** 187.4 26.19** 28.63* 120.8** 189.6 22.49** 34.79** 95.10* 155.5

(9.911) (14.020) (46.260) (117.400) (12.220) (15.420) (51.840) (123.400) (10.470) (14.690) (50.850) (115.700)
SOUTH 0.623 -4.054 -67.02*** -122.9*** 0.662 -5.526** -63.53*** -115.9*** 1.563 -3.615 -60.32*** -113.2***

(1.823) (2.690) (10.250) (18.810) (1.756) (2.687) (9.845) (18.660) (2.169) (2.811) (9.540) (19.640)
MPCE 5.845 19.59 -209.9* -70.6


(13.680) (18.710) (119.300) (176.000)
MPCE2 -3.654 -8.08 89.23* 4.046


(5.490) (7.659) (47.700) (71.630)
DDP

-0.0448 0.595 -0.0698 -6.188**


(0.241) (0.386) (1.698) (2.460)
DDP2

0.000604 -0.0049 -0.00069 0.0711**


(0.003) (0.005) (0.021) (0.032)
LIT_RATE

0.977 1.318 5.762* -0.684

(0.586) (0.991) (2.923) (6.083)
LIT_RATE2

-0.00840* -0.0102 -0.0472* -0.0124

(0.005) (0.008) (0.024) (0.049)
Constant -21.07* -48.23* 151.1 -33.51 -12.31 -33.73 40.35 120.2 -43.92** -86.31* -139.9 116.8

(12.150) (28.200) (118.700) (188.000) (14.460) (28.750) (121.600) (192.300) (18.960) (45.430) (133.800) (279.000)
Observations 64 67 68 66 64 67 68 66 64 67 68 66
R-squared 0.192 0.23 0.521 0.581 0.164 0.286 0.482 0.581 0.206 0.239 0.497 0.586
adj R-squared 0.107 0.153 0.474 0.539 0.0763 0.215 0.431 0.539 0.122 0.163 0.448 0.544
Robust standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1
14

Moreover, this U-shaped finding is inconsistent with the significant, linear relationships
we found between MPCE and AVGSPM, and between LIT_RATE and AVGSPM in Table 3. Taken
together, these results suggest to us a negative relationship between income and particulate
matter. However, regardless of whether one prefers to characterise the relationship between
AVGSPM and DDP as linear or U-shaped, neither characterisation is consistent with the Kuznets
curve hypothesis, which predicts an inverted U-shaped relationship.
The findings related to the third development indicator in Table 4 do, however, provide
some evidence that is consistent with the Kuznets curve hypothesis. While none of these
coefficient estimates are significant at the five per cent level, in all models using LIT_RATE as
the development indicator except for the one where AVGSPM is the dependent variable, the
positive coefficient on LIT_RATE and negative coefficient on LIT_RATE2 suggest a Kuznets curve
(an inverted U-shaped) relationship between social development and pollution. For AVGSO2,
the top of the inverted U occurs when LIT_RATE equals 61.1; for AVGNO2 this value is 64.6, and
for AVGRSPM this value is 61.0. Thus, these findings indicate that air pollution increases as
literacy increases, but after literacy reaches about sixty per cent, further increases in literacy
are associated with decreasing pollution.
10

Before concluding this section, we briefly describe the effect of the other independent
variables on the four pollution measures. Across all models, logPOP is associated with higher
levels of air pollution. The estimates we report above are useful for comparing the scale effects
of city size on pollution in India to that from other countries, but in order to make our results
more comparable with those from Zheng et al. (2010), in non-reported results, we estimated
models identical to those in Tables 3 and 4 but that used the natural logarithm of the four
15

average pollution measures as a dependent variable.
11
This log-log specification has a desirable
property in that the coefficient estimates can be directly interpreted as elasticites. In these
results, the average of the coefficients on logPOP for the models with logAVGSO2 as a
dependent variable was 0.12, meaning a 10 per cent increase in population leads to a 1.2 per
cent increase in AVGSO2. For the models of logAVGNO2, the average elasticity was 0.15 and
for the two particulate matter measures the average elasticity was 0.17. It is interesting to note
that the average population elasticity reported by Zheng et al. (2010) for particulate matter for
Chinese cities was identical (to two decimal places) to what we found for Indian cities. On the
other hand, in Zheng et al. (2010) the average elasticity for SO2 was 0.36, which is exactly three
times higher than what we found in our unreported results.
We do not find statistically significant evidence that cities with higher levels of
precipitation enjoy less pollution, however we do find strong evidence that cities with a higher
concentration of manufacturing have higher levels of all four measures of pollution. Finally,
southern India enjoys much lower levels of particulate matter pollution, and to some degree,
lower levels of NO2. This is also apparent from Table 6 in the Appendix, which presents a list of
cities analysed in this study, ranked from lowest to highest in terms of AVGRSPM. Most of the
cities with the lowest particulate matter levels are located in the south.
12





16

Pollution and Industry Type

It is important to emphasise that these results reported above control for the fraction of
output in manufacturing and a variety of other factors. The large, positive coefficient on
PCTMANUF suggests that some types of development are worse than others with regard to
pollution. In order to shed light on which industries are most strongly associated with air
pollution, below we present a table containing the simple correlation between the level of
economic activity in the various industry categories identified by the Planning Commission and
our four measures of pollution.
13

Table 5: Correlation between DDP by Category and Pollution
AVGSO2 AVGNO2 AVGRSPM AVGSPM
Agriculture 0.06 0.16 0.10 -0.03
Forestry and Logging 0.13 0.12 -0.23 -0.10
Fishing -0.06 0.22 -0.13 -0.11
Mining and Quarrying 0.19 0.22 -0.04 0.05
Manufacturing 0.29 0.34 -0.02 0.00
Registered Manufacturing 0.30 0.34 -0.03 0.00
Unregistered Manufacturing 0.21 0.26 0.02 -0.01
Electricity, Gas and Water 0.20 0.31 0.01 0.01
Construction 0.10 0.25 -0.14 -0.16
Trade, Hotels and Restaurants 0.20 0.35 -0.07 -0.03
Railways 0.20 0.37 0.16 0.23
Other Transport 0.16 0.31 -0.07 -0.07
Storage 0.17 0.43 0.21 0.14
Communication 0.20 0.31 -0.06 -0.06
Banking and Insurance 0.23 0.28 -0.07 -0.02
Real Estate and Legal Services 0.21 0.33 -0.07 -0.03
Public Administration 0.10 0.41 0.03 0.06
Other Services 0.14 0.41 -0.05 -0.05
Total DDP 0.24 0.38 -0.05 -0.03
DDP per capita 0.21 0.30 -0.09 -0.20


17

From this table, one can see that most categories are positively correlated with SO2
emissions, while only the category fishing is negatively correlated with SO2. The results are
slightly different for NO2; the highest positive correlations here are with storage, public
administration, and other services, and no category is negatively correlated with NO2.
The results are much different for the two particular matter measures (RSPM and SPM);
no industry category was highly positively correlated with either measure (the highest was
storage, and railways), and output in most categories was negatively correlated with particulate
matter levels.
The correlations identified in Table 5 correspond well with the findings identified above.
Though these simple correlations do not allow for nuanced interpretation as do our multiple
regression results, they do suggest that, in general, economic development is positively
correlated with SO2 and NO2 and is negatively correlated with particulate matter. The high
positive correlation between NO2 and services and public administration may be surprising,
until one considers that NO2 emissions are largely attributable to vehicular transportation, and
there are likely many residents of these cities who can afford to commute in motorised
vehicles.
14

Conclusion

We have estimated air pollution production functions that have controlled for multiple
factors. Ordinary least squares results indicate that, controlling for a variety of factors, there is
a negative relationship between income and particulate matter levels, a positive relationship
between income and nitrogen dioxide, and no relationship between income and sulphur
dioxide. Though our results do not indicate a Kuznets curve relationship between income and
18

air pollution at the sub-national level for India, we are not able to reject the Kuznets curve-type
relationship between literacy and air pollution with a high level of confidence. We also provide
an estimate of the magnitude by which air pollution levels increase with city size; the
population elasticity of pollution for Indian cities is identical to that found in previous research
for Chinese cities for particulate matter, but is much smaller with respect to sulphur dioxide.
Finally, we briefly considered the effect of output in various industries on the four pollution
measures. Output in most industries is positively correlated with sulphur dioxide and nitrogen
dioxide levels, but is negatively correlated with particulate matter levels.
The policy implications of these findings suggest to us that, while cost-benefit analysis
should be used to set all pollution reduction goals, special emphasis on developing new
technological options for reducing SO2 and NO2 may be needed, as it appears that existing
technology to mitigate particulates can be adopted with rising development.
From a scholarly perspective, by demonstrating how high quality, publicly available data
sources can be combined to generate new knowledge concerning the relationship between
socioeconomic development and pollution, we believe a major contribution of this study is to
facilitate future empirical research. The estimates we present can also be directly used in a
variety of studies. Finally, while we have made progress in answering the question of which
proxies for average income measures at the city level are most appropriate for use in research,
we have not resolved this issue and future research here is warranted.


19

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21

Appendix A: Method of Calculating Average Pollution by City

For each state, daily air pollution data at the monitoring station level was downloaded
from the CPCBs online Environmental Data Bank. We assembled these data into one file and
this yielded 176,292 observations. Fewer than 1,000 observations were taken prior to 2005.
From 2006 to 2011, total observations ranged from 9,529 (in 2010) and 34,387 (in 2007). We
then aggregated the data by city. This yielded a total number of cities with average pollution
data equal to 164.
Next we matched the city name from the CPCB data to the town, district and state
codes contained in the town directory file. There were 15 cities that we could not match.
15

Finally, we merged the pollution and town directory data to the literacy, MPCE and DDP data
described above; variables from at least one of these sources was not available for 30 cities. In
estimating our models, we followed several data rules. First, we restricted the sample to cities
whose average particulate matter estimates were constructed with at least 365 daily pollution
observations. In calculating summary statistics in Table 2, we dropped cities without at least
one valid average pollution estimate. Finally, we dropped 14 cities with population less than
100,000. This left us with a sample that ranged from 57 to 64 depending on the pollution
measure.
Appendix B: Average Pollution in Select Indian Cities

In the table below, we present the average pollution figures used in the analysis. The
cities are ranked based on average respirable particular matter. Full data used in this study is
available upon request from the author.
22

Table 6: Average Pollution Levels by City (sorted by average RSPM)
city state AVGSO2 AVGNO2 AVGRSPM AVGSPM
Belgaum Karnataka - 15.0 33.3 70.7
Tirupati Andhra Pradesh 4.1 9.1 33.9 103.4
Kozhikode Kerala - 8.9 36.3 83.5
Madurai Tamil Nadu 10.4 24.2 41.1 98.8
Kottayam Kerala 5.4 18.1 45.0 48.5
Kochi Kerala 7.4 13.1 45.5 78.8
Mysore Karnataka 15.7 25.7 45.8 88.4
Dibrugarh Assam 5.3 12.4 49.6 90.4
Sambalpur Orissa 3.9 13.2 49.9 127.6
Shimla Himachal Pradesh 4.7 11.4 53.3 105.5
Mangalore Karnataka 7.2 - 53.7 119.8
Thane Maharashtra 10.7 13.8 54.1 108.7
Salem Tamil Nadu 7.9 26.5 61.8 99.2
Hassan Karnataka 4.8 21.6 61.8 152.1
Singrauli Madhya Pradesh - - 67.2 307.8
Trivandrum Kerala 9.4 24.5 67.9 77.3
Chennai Tamil Nadu 12.0 19.2 68.9 153.7
Coimbatore Tamil Nadu 7.1 31.8 70.3 140.7
Haldia West Bengal 8.6 44.0 72.3 166.7
Gulbarga Karnataka - 13.4 73.8 200.3
Palakkad Kerala - - 74.2 133.3
Amravati Maharashtra 10.4 13.3 74.8 -
Nashik Maharashtra 32.8 29.3 78.0 152.4
Kurnool Andhra Pradesh 4.0 13.7 78.4 185.4
Kolhapur Maharashtra 9.6 20.9 78.5 194.2
Dewas Madhya Pradesh 15.6 22.4 78.8 192.0
Cuttack Orissa - 24.5 79.3 226.2
Hyderabad Andhra Pradesh 5.2 25.9 81.4 224.7
Bangalore Karnataka 14.7 40.1 85.5 223.8
Vijayawada Andhra Pradesh 5.8 24.9 87.5 208.2
Bhopal Madhya Pradesh 6.0 16.5 88.4 233.6
Visakhapatnam Andhra Pradesh 10.9 28.6 88.9 187.2
Ujjain Madhya Pradesh 12.0 12.8 90.6 189.1
Hubli-Dharwad Karnataka 4.0 10.5 90.7 198.3
Udaipur Rajasthan 7.2 34.6 90.7 281.4
Solapur Maharashtra 17.0 35.8 93.7 287.0
Nagpur Maharashtra 9.5 30.7 99.2 194.7
Korba Chhattisgarh 13.2 21.0 101.8 211.5
Guwahati Assam 7.2 15.8 108.4 184.1
Note: A missing value indicates there were fewer than 365 daily observations for
this pollution measure for a given city.
23

Table 6 (continued): Average Pollution Levels by City (sorted by average RSPM)
city state AVGSO2 AVGNO2 AVGRSPM AVGSPM
Greater Mumbai Maharashtra 21.2 43.8 108.6 257.1
Navi Mumbai Maharashtra 16.4 36.3 109.1 270.4
Hisar Haryana 7.9 - 111.1 195.9
Varanasi Uttar Pradesh 16.2 18.8 112.2 354.1
Jabalpur Madhya Pradesh

22.8 112.7 247.0
Kolkata West Bengal 8.9 57.5 115.4 234.2
Bhilai Nagar Chhattisgarh 16.9 24.4 116.1 207.6
Kota Rajasthan 8.0 24.1 116.2 251.1
Patna Bihar 8.8 37.4 120.6 306.2
Jaipur Rajasthan 5.9 31.8 129.4 301.2
Asansol West Bengal 7.1 59.2 133.2 283.1
Chandrapur Maharashtra 32.8 41.8 134.9 221.7
Alwar Rajasthan 7.6 21.3 137.3 250.4
Jodhpur Rajasthan 6.4 22.3 143.0 371.8
Indore Madhya Pradesh 9.3 16.5 147.6 243.2
Noida Uttar Pradesh 13.7 44.5 148.9 443.0
Jamshedpur Jharkhand 37.2 50.1 162.7 314.9
Jalandhar Punjab 11.8 29.7 164.2 -
Allahabad Uttar Pradesh 8.4 31.2 171.1 407.2
Agra Uttar Pradesh 6.7 22.0 181.0 377.9
Lucknow Uttar Pradesh 9.8 32.7 192.4 407.0
Kanpur Uttar Pradesh 6.9 23.6 193.2 425.1
Satna Madhya Pradesh 3.6 7.5 193.5 290.9
Gwalior Madhya Pradesh 8.9 16.6 198.5 305.2
Firozabad Uttar Pradesh 20.4 30.9 200.9 411.0
Amritsar Punjab 13.9 34.3 212.3 407.7
Khanna Punjab 10.0 34.3 234.2
Ludhiana Punjab 12.0 35.6 238.0 -
Ghaziabad Uttar Pradesh 19.1 19.9 254.8 463.8
Bathinda Punjab 10.1 24.1 - 227.4
Sagar Madhya Pradesh 4.3 15.5 - 239.5
Meerut Uttar Pradesh - - - 640.2
Patiala Punjab 7.1 19.7 - -
Note: A missing value indicates there were fewer than 365 daily observations for
this pollution measure for a given city.







24

Endnotes

1
Urbanisation can also lead to environmental improvements. As one example, women in urban areas have fewer
children and therefore place fewer demands on the environment. In 2001, the average fertility rate in districts in
India that are majority urban was 2.38, while a woman in a rural district had on average 3.38 children (these
calculations were made using fertility estimates presented in Guilmoto and Rajan, 2002).
2
Economist Intelligence Unit (2011).
3
Greenstone and Hanna (2013) describe the legislation that enabled the collection of this data.
4
Many researchers refer to RSPM as PM
10
though here we use the CPCB terminology.
5
It was only in the 61st round survey of NSS (2004-05) that the sampling design defined rural and urban parts of
districts as strata for selection of sample villages and urban blocks respectively. This has paved the way for
generating unbiased estimates of important socio-economic parameters at the district-level adequately supported
by the sample design. Chaudhuri and Gupta (2009, p. 94).
6
When using all districts in India for which DDP, MPCE and literacy data are available, the correlation between DDP
and LIT_RATE is 0.62; between DDP and MPCE it is 0.73, and between MPCE and LIT_RATE it is 0.62.
7
Our definition of the south includes the following states: Andhra Pradesh, Goa, Karnataka, Kerala, Maharashtra
and Tamil Nadu.
8
Both our literacy rate and population measures are from the year 2001. As of writing, only provisional figures
have been released from the 2011 Census. We have repeated the analysis presented below using these more
recent but provisional figures and overall the results were quite similar. These results are available upon request.
9
The WHO Outdoor Pollution Database includes CPCB data on about 30 cities in India. However by only including
data from residential monitoring stations for one year, their sample size is only about half as large as what we
were able to achieve by using more years of data and all station types.
10
From Table 2, the average literacy rate among cities in our sample was 67.54.
11
These results are available from the author upon request. In terms of sign and statistical significance of the
coefficient estimates, there were only small differences across the level and log specifications.
12
In both Tables 3 and 4, the coefficients on the South dummy were either both negative and significant, or, as in
all cases with SO2, not statistically different from zero.
13
Note the industry measures are of the total level of economic activity (or output) in an industry category, not the
fraction of output in the district in that category.
14
According to Greenstone and Hanna (2013, pp. 10-11), The monitored pollutants can be attributed to a variety
of sources. PM is regarded by the CPCB as a general indicator of pollutionSO2 emissions, on the other hand, are
predominantly a byproduct of thermal power generation; globally, 80 per cent of sulphur emissions in 1990 were
attributable to fossil fuel useNO2 is viewed by the CPCB as an indicator of vehicular pollution, though it is
produced in almost all combustion reactions.
15
Aurangabad (MS), Balasore, Berhampur, Byrnihat, Damtal, Daranga, Dawki, Imphal, Jhansi, Lote, Naya Nangal,
North Lakhimpur Town, Thoothukudi, Vasco, Wayanad.