Working Paper: NBER ID: w22155
Authors: Karen Clay; Joshua Lewis; Edson Severnini
Abstract: Investments in local development and infrastructure projects often generate negative externalities such as pollution. Previous work has either focused on the potential for these investments to stimulate local economic activity or the health costs associated with air pollution. This paper examines the tradeoffs associated with the historical expansion in coal-fired electricity generation in the United States, which fueled local development but produced large amounts of unregulated air pollution. We focus on a highly responsive measure of health tradeoffs: the infant mortality rate. Our analysis leverages newly digitized data on all major coal-fired power plants for the period 1938-1962, and two complementary difference-in-differences strategies based on the opening of power plants and new generating units at existing sites. We find that coal-fired power plants imposed large negative health externalities, which were partially offset by the benefits from local electricity generation. We uncover substantial heterogeneity in these tradeoffs, both across counties and over time. Expansions in coal capacity led to increases in infant mortality in counties with high baseline access to electricity, but had no effect in low-access counties. Initial expansions in coal capacity led to decreases in infant mortality, but subsequent additions led to increases in infant mortality. These evolving tradeoffs highlight the importance of accounting for both current and future payoffs when designing environmental regulation.
Keywords: infant mortality; air pollution; coalfired power plants; health tradeoffs; economic development
JEL Codes: I18; N22; Q52; Q53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| coalfired power plants (L94) | infant mortality rates (J13) |
| increased coal capacity (L94) | infant mortality rates (J13) |
| low-access counties (initial expansions in coal capacity) (L71) | infant mortality rates (J13) |
| high-access counties (subsequent expansions in coal capacity) (L71) | infant mortality rates (J13) |
| initial health benefits from electrification (I15) | infant mortality rates (J13) |
| negative health impacts from coal capacity increases (I14) | infant mortality rates (J13) |