recent decades. The population of Kampala, the capital city, more than doubled since 1990 and has now reached over 1.5 million (UBOS 2016). Some estimates suggest that Kampala could have 10 million inhabitants by 2040 (Hobson and Kathage 2017). Urbanization in Uganda has been accompanied by a rapid increase in motorization. The road network in Kampala was built in 1960 for about 100,000 vehicles per day. Today, about 400,000 vehicles per day use these roads (KCCA 2014).<sup>7</sup> The growth of a second-hand vehicle fleet (see Appendix Figure A11), together with unpaved roads and limited coordinated land use or transport planning, make motorization one of the main sources of pollution in urban Uganda.<sup>8</sup> The issue is acknowledged by Ugandan policy makers, but no comprehensive solution exists yet. In 2018, a ban on imports of motor vehicles older than 15 years was enacted, significantly lowering the average age of newly registered vehicles, as shown in Appendix Figure A12. While this policy was effective, the average age of newly registered vehicles still remained high at over 7 years in 2018. A Bus Rapid Transit (BRT) project for Kampala, with pre-feasibility studies completed in 2010, is still pending.

# **3 Conceptual Framework**

We introduce a simple framework to clarify the key trade-offs that we study empirically in the next sections. Our goal in this paper is to study the role of managers in mediating the pollution exposure of workers. Therefore, we consider the problem of a manager that operates within a polluted city and maximizes profits. We focus on three decisions that are plausibly directly affected by pollution considerations: (i) the choice of the production location _l_ ; (ii) the choice of the ability of workers _h_ , as high ability workers may be less willing to work in a polluted environment;<sup>9</sup> (iii) the amount of investment in equipment or organizational strategies to limit pollution exposure, _e_ . We abstract from all other choices made by managers, such as firm size and capital intensity, which we assume are not directly affected by pollution exposure. We also abstract from any equilibrium consideration as our goal is not to characterize the equilibrium allocation of production, but rather to describe how firms are managed in polluted cities.

A manager _i_ , with productivity (or ability) _zi_ , chooses a location _l_ , workers’ type _h_ , and investments _e_ to maximize profits, solving

> 7 Cross-country research estimates an income elasticity of vehicle ownership of 1.1 (Dargay et al. 2007, Ingram and Liu 1999).

> 8The Ministry of Works and Transport reports that petrol and diesel vehicles are 15.4 and 16.4 years old on average, respectively (Source: `http://www.airqualityandmobility.org/PCFV/EAC_Workshop/ Ugandasinitiativecleanervehicles.pdf` ). Kirenga et al. (2015) emphasize the role of unpaved roads in driving up PM2.5 concentrations in Kampala and Jinja, two Ugandan cities: residential sites with unpaved roads had very high PM2.5 concentrations of 152.6 micrograms per cubic meter vs 120.5 micrograms per cubic meter on average in residential sites.

> 9Khanna et al. (2021) show that high-skilled individuals in China are more likely to migrate in response to pollution.

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