ager’s quality, which we use to generate one summary index of managerial skill. Finally, we have access to the geo-coded universe of Ugandan roads.

Guided by the model, we use this data to present three results on the role of managers in mediating exposure to pollution in urban Uganda. First, we show that road traffic bundles product demand and pollution exposure: areas near major roads are substantially more polluted, but also feature significantly higher profits per worker. As a result, location choice entails a trade-off between pollution exposure and market access. We also verify that the higher pollution is mainly driven by road traffic, and we use our survey data to provide direct evidence that the profitability benefits can be explained primarily by the fact that, as it is typically the case across the developing world, firms are small and do not have any means to market their products, so that they sell locally through face-to-face interactions. Hence, proximity to busy roads is essential to access customers. Having established the presence of bundling, we study how managerial choices determine workers’ exposure to pollution within the city.

Our second result is that firms do not actively avoid polluted areas; in fact, they locate along the most trafficked, most highly polluted roads. This is true even within very small geographical units, and we rule out that it is driven by reverse causality by showing that firms themselves are not the source of pollution and the location of roads is pre-determined with respect to firm location. Importantly, managers’ quality does _not_ predict firm location choice. This rules out one potential type of differential avoidance behavior: even high ability managers have chosen to locate in the midst of pollution to access customers. Seen through the lenses of the model, this result shows that the profitability benefits of locating in busy areas outweigh the productivity costs of higher exposure to traffic pollution for all types of managers.

The fact that firms cluster along polluted roads opens up the possibility that workers may be exposed to substantial pollution. Our readings show that high-polluted areas within Ugandan cities feature similar pollution levels as Chinese cities. In addition, our survey confirms that these small manufacturing firms produce output mostly in the open air near the roadside. As a result, daily production activities are a large source of pollution exposure for workers, as they spend their whole day working essentially in the streets while being exposed to pollution. Documenting whether and how managers adapt to the local pollution exposure is therefore critical to understand the implications of the observed location choices on workers’ welfare.

Our third result is that higher ability managers better protect their workers from pollution exposure. In addition to having higher profits per worker and paying higher wages, managers of higher ability are significantly more likely to provide pollution protective equipment (e.g., masks) to their workers, and to allow flexibility in commuting times to their workers to avoid being exposed to pollution at rush hour. In line with this, workers employed by high ability managers are more likely to report that their managers engage in active steps to protect them from pollution exposure, and these workers are also significantly more aware of pollution as 3