Working Paper: NBER ID: w24375
Authors: Ross Levine; Chen Lin; Zigan Wang; Wensi Xie
Abstract: We evaluate the impact of the credit conditions facing corporations on their emissions of toxic air pollutants. Exploiting cross-county, cross-time shale discoveries that generated liquidity windfalls at local bank branches, we construct measures of (1) the degree to which banks in non-shale counties, i.e., counties where shale was not discovered, receive liquidity shocks through their branches in shale counties and (2) the degree to which a corporation in a non-shale county has a relationship lender that receives liquidity shocks through its branches. From both the county- and firm-level analyses, we discover that positive shocks to credit conditions reduce corporate pollution.
Keywords: bank liquidity; credit supply; toxic emissions; environmental quality
JEL Codes: G21; O16; Q40; Q52; Q53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Positive shocks to credit conditions (E51) | Reduction in corporate emissions of toxic air pollutants (Q52) |
| Liquidity shock to banks in nonshale counties (F65) | Lower toxic air pollution levels in those counties (Q52) |
| Positive liquidity shock to relationship lenders (G21) | Decrease in toxic emissions for firms (Q52) |