VoxDev Development Economics

Particulate matter is, Michael Greenstone argues, the greatest public health threat on the planet. Worse than HIV, cigarettes, and alcohol. The average person  loses about two years of life expectancy to it. In India, the figure is three and a half years. The solution to this problem has been tested, and it works, at least in high-income countries.
Greenstone and his co-authors ran a randomised controlled trial in Surat, Gujarat: from 300 industrial plants, mostly making textiles, all burning coal, half were randomly assigned to a market where pollution permits could be bought and sold. The results: in the market, pollution fell 25%, compliance was near-perfect, and abatement costs dropped 12%. The cost-benefit ratio is as high as 200 to one. Many plants in the control group asked to be moved into the market.
The research behind this episode:
Greenstone, Michael, Rohini Pande, Nicholas Ryan, and Anant Sudarshan. 2025. "Can Pollution Markets Work in Developing Countries? Experimental Evidence from India." Quarterly Journal of Economics 140 (2): 1003–1060. An ungated version is available as BFI Working Paper 2025-53.
To cite this episode:

Phillips, Tim. 2025. "Can Pollution Markets Work in Developing Countries?" VoxDev Talk (podcast). 
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About Michael Greenstone

Michael Greenstone is the Milton Friedman Distinguished Service Professor in Economics at the University of Chicago, where he is the founding Director of the Energy Policy Institute at Chicago (EPIC) and the Institute for Climate and Sustainable Growth. His research focuses on the costs and benefits of environmental quality, including the Air Quality Life Index, which tracks the toll of particulate pollution country by country. He previously served as Chief Economist for the President's Council of Economic Advisers under President Obama. 
Research cited in this episode

Air Quality Life Index (AQLI), Energy Policy Institute at Chicago. The source of the life-expectancy statistics used in this episode: particulate pollution costs the average person on Earth roughly two years of life expectancy, with India averaging three and a half years. The index tracks this burden country by country, city by city.
The US sulphur dioxide cap-and-trade programme, established under the 1990 Clean Air Act Amendments, was the canonical precedent Greenstone cited: a market that dramatically reduced acid rain in the eastern United States at costs far below pre-programme projections. He noted that the UK and EU have since built comparable CO2 markets. All have worked well. The question this experiment addressed was whether the same logic held in the developing world, where almost all the pollution now is.
Emissions Market Accelerator. An independent scale-up organisation founded by Greenstone and colleagues to replicate the Gujarat model beyond the original research setting. Current pipeline: a statewide sulphur dioxide market for Maharashtra (including large power plants, not just textiles), and advanced conversations in Pakistan and Brazil. Within Gujarat, a water pollution market is also in development.
More VoxDev Talks on this topic

Regulating pollution in low- and middle-income countries Rohini Pande and Nicholas Ryan, two co-authors of the paper discussed in this episode, on the political economy of pollution regulation in developing countries: why enforcement is hard, and what makes it work.
Air pollution and infant mortality Jennifer Burney on the health costs of particulate air pollution for young children, and what the evidence from Saharan dust patterns across Sub-Saharan Africa reveals about exposure and mortality.
The Social Cost of Carbon Michael Greenstone's earlier VoxDev Talk, on how assigning a monetary value to carbon emissions can drive better policy decisions and make the case for action that regulation alone struggles to make.
Related reading on VoxDev

Reducing air pollution: Evidence from payments to reduce crop burning in India How cash payments to farmers in northern India changed behaviour and cut the seasonal haze from crop fires that pushes Delhi's air quality to its worst each winter.
Paying to pollute: How carbon offsets actually raised emissions in China A cautionary study on market-based pollution controls: when incentives point the wrong way, a market can make things worse rather than better.
The effect of pollution on worker productivity: Evidence from call-centre workers in China Air pollution reduces cognitive performance and output, adding an economic productivity argument to the health case for cleaning the air.

A small number of Asian countries have provided thousands of high-skilled migrants to the US, many of whom have gone on to great success. What created this long-term trend, and what has it contributed to the US economy? And with changes in domestic policy, technology, and the opportunities in other countries, will it continue? 
Gaurav Khanna of UC San Diego tells Tim Phillips the story of high-skilled migration to the US and warns of the consequences for the US economy if, in the future, they decide to go elsewhere – or stay at home.

With the number of global refugees continuing to rise, integrating refugees has become a difficult challenge for hosts – and it is far from easy for the refugees themselves. Dany Bahar of Brown University and Giovanni Peri of UC Davis tell Tim Phillips about a new review of the evidence that evaluates what policies have worked.

In this episode of Ideas in Development, we ask what needs to happen before AI can take off in Africa.
Rose Mutiso talks us through the current state of energy and digital infrastructure in Africa, why leapfrogging is not guaranteed with AI, and what fundamental bottlenecks need to be addressed.
Read the full show notes: https://voxdev.org/topic/technology-innovation/ai-africa-barriers-opportunities-and-policy

Almost everywhere, women have less economic power than men, and earn less at work. Their commitment to childcare and work in the home gives them less spare time than men, as well as less recognition for the value of what they do. 
In another episodes based on the new book The London Consensus, published by LSE Press, Barbara Petrongolo of the University of Oxford, who one of the authors of the book’s chapter on Labour markets and gender inequality, and Ashwini Deshpande of Ashoka University, who wrote a response discuss with Tim Phillips whether there is a consensus on policy – and way to implement it – in this area. 
Download The London Consensus. https://www.lse.ac.uk/school-of-public-policy/research/london-consensus