The effect of Beijing's driving restrictions on pollution and economic activity

•In contrast to previous evidence, driving restrictions improve air quality.•Use a spatial test to disentangle confounding policies affecting air pollution.•Based on TV viewership, driving restrictions reduce discretionary work time.•Quantify short‐run benefits from improved health and costs of reduced output.

We evaluate the pollution and labor supply reductions from Beijing's driving restrictions. Causal effects are identified from both time-series and spatial variation in air quality and intra-day variation in television viewership. Based on daily data from multiple monitoring stations, air pollution falls 21% during one-day-per-week restrictions. Based on hourly television viewership data, viewership during the restrictions increases by 9 to 17% for workers with discretionary work time but is unaffected for workers without, consistent with the restrictions' higher per-day commute costs reducing daily labor supply. We provide possible reasons for the policy's success, including evidence of high compliance based on parking garage entrance records.