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Even as policymakers seek to encourage economic development by addressing misallocation due to frictions in labor markets, the associated production externalities – such as air pollution – remain unexplored. Using a regression discontinuity design, we show access to rural roads increases agricultural fires and particulate emissions. Farm labor exits are a likely mechanism responsible for the increase in agricultural fires: rural roads cause movement of workers out of agriculture and induce farmers to use fire – a labor-saving but polluting technology – to clear agricultural residue or to make harvesting less labor-intensive. Overall, the adoption of fires due to rural roads increases infant mortality rate by 5.5% in downwind locations.
