Working Paper: NBER ID: w26682
Authors: Catherine Hausman; Samuel Stolper
Abstract: Research spanning several disciplines has repeatedly documented disproportionate pollution exposure in low-income communities and communities of color. Among the various proposed causes of this pattern, those that have received the most attention are income inequality, discrimination, and firm costs (of inputs and regulatory compliance). We argue that an additional channel – information – is likely to play an important role in generating disparities in pollution exposure. We present multiple reasons for a tendency to underestimate pollution burdens. Using a model of housing choice, we then derive conditions under which “hidden” pollution leads to an inequality – even when all households face the same lack of information. This inequality arises when households sort according to known pollution and other disamenities, which we show are positively correlated with hidden pollution. To help bridge the gap between environmental justice and economics, we discuss the relationship between hidden information and three different distributional measures: exposure to pollution; exposure to hidden pollution; and welfare loss due to hidden pollution.
Keywords: Inequality; Information Failures; Air Pollution; Environmental Justice
JEL Codes: D63; D83; Q53; Q56; R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| information failures (D83) | pollution exposure (Q53) |
| low-income households (R20) | more pollution exposure (Q53) |
| low-income households (R20) | more hidden pollution (Q53) |
| information failures (D83) | deadweight loss (H21) |
| low-income households (R20) | greater deadweight loss (H21) |
| information failures + income-based sorting (D82) | disparities in pollution exposure (I14) |
| information failures + income-based sorting (D82) | welfare loss for low-income households (H53) |