We estimate the effect of air pollution on work-related accidents using administrative data from Italy in a setting characterized by strict air pollution and work safety regulations. To address the potential endogeneity due to unobserved productivity shifts and firm-specific pollution sources, we use winter heating rules in highly urbanized areas as a exogenous sources of variation in pollution exposure. We find that a one unit increase in PM10 causes 0.014 additional accidents and 0.0013 additional disabilities. We also explore the theoretical implications of these findings in a setting where firms are risk carriers and fully bear the compensation costs of less severe accidents. We empirically confirm that firms have an incentive to deploy defensive investments also when the risk of accidents derives from external factors, as in the case of air quality. Our back-of-the-enveloped calculation shows that each additional unit in PM10 concentration would increase the total cost of an accident by about 1.7%.
 

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