Working Paper: NBER ID: w10717
Authors: Hilary Sigman
Abstract: Most US federal environmental policies allow states to assume responsibility for implementation and enforcement of regulations; states with this responsibility are referred to as "authorized'' or having "primacy.'' Although such decentralization may have benefits, it may also have costs with pollution spillovers across states. This paper estimates these costs empirically by studying the free riding of states authorized under the Clean Water Act. The analysis examines water quality in rivers around the US and includes fixed effects for the location where water quality is monitored to address unobserved geographic heterogeneity. The estimated equations suggest that free riding gives rise to a 4% degradation of water quality downstream of authorized states, with an environmental cost downstream of $17 million annually.
Keywords: transboundary spillovers; environmental policies; decentralization; Clean Water Act; free riding
JEL Codes: Q5; H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| State authorization under the Clean Water Act (CWA) (Q25) | Water quality degradation downstream (Q25) |
| State authorization under the Clean Water Act (CWA) (Q25) | Water quality index (WQI) at border stations (Q25) |
| Free riding behavior of authorized states (H40) | Water quality degradation downstream (Q25) |