Suppose you are the recently elected mayor of Model City, a large city facing severe air pollution. You ran on a platform promising voters that you will improve the city’s air quality. How would you fulfill your promise? What are the sources and social costs of air pollution? What policies can you use to reduce the pollution levels your constituents face? How should you decide how much to spend reducing the pollution levels in your city? First of all, you should know that you are not alone. The World Health Organization (WHO) estimates that in 2012, 90 percent of people living in urban areas experienced air pollution that exceeded the WHO’s recommended limits and that air quality was generally declining (WHO, 2016). If you are a mayor in a lower-income country then your task is likely even more difficult. Pollution is worse in low-and middle-income countries, with 98 percent of cities not meeting guidelines compared to 56 percent in high-income countries (WHO, 2016). The consequences of such high levels of pollution are dire. The WHO estimates that in 2012 ambient air pollution caused 3 million deaths, 87 percent of which were in low-and middle-income countries, and associated health complications caused 85 million disability-adjusted life years (DALYs)(WHO, 2016). 1

This chapter’s goal is to provide useful advice on these questions for mayors based on high-quality academic economic studies. What do these economic studies offer to help mayors better understand the sources of air pollution, the costs it imposes on cities, and policies that are effective in reducing it? Section 2 describes the local and imported sources of air pollution in cities. Section 3 explores the economic costs that air pollution imposes on cities via its impact on health, mortality, psychological well-being, labor productivity, labor mobility, and out-migration. Section 4 discusses the effectiveness of pollution-reduction policies that cities around the world have implemented–a possible tool box for mayors. Section 5 discusses whether pollution policy design and implementation is compatible with mayors’ incentives, including the role of information. The last section summarizes how mayors can use the insights from the studies reviewed in this chapter and proposes future research directions. There are earlier economic review articles on air pollution and cities that take different perspectives. Kahn (2006) reviews the supply and demand of city air pollution and provides a conceptual framework for government policy interventions. Kahn and Walsh (2015) survey theoretical and empirical work on the relationship between environmental amenities (including air pollution) and urban growth. In contrast to these papers, we focus on recent empirical work that measures the economic costs of air pollution and evaluates city government interventions to reduce these costs. Wherever possible, we focus on papers that provide causal quantification and provide theoretical background only where necessary to interpret the empirical results. We consider articles examining all countries, although empirical work thus far has focused predominantly on the United States (US) and China.