Working Paper: NBER ID: w29845
Authors: Alex Hollingsworth; Taylor Jaworski; Carl Kitchens; Ivan J. Rudik
Abstract: We develop a spatial equilibrium model to evaluate the efficiency and distributional impacts of the leading air quality regulation in the United States: the National Ambient Air Quality Standards (NAAQS). We link our economic model to an integrated assessment model for air pollutants which allows us to capture endogenous changes in emissions, amenities, labor, and production. Our results show that the NAAQS generate over $23 billion of annual welfare gains. This is roughly 80 percent of welfare gains of the second-best NAAQS design, but only 25 percent of the first-best emission pricing policy. The NAAQS benefits are concentrated in a small set of cities, impose substantial costs on manufacturing workers, improve amenities in counties in compliance with the NAAQS, and reduce emissions in compliance counties through general equilibrium channels. These findings highlight the importance of accounting for geographic reallocation and equilibrium responses when quantifying the effects of environmental regulation.
Keywords: Environmental Regulation; Air Quality Standards; Welfare Gains; Economic Geography
JEL Codes: F18; Q52; Q53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| NAAQS (Q53) | annual welfare gains (D69) |
| nonattainment designations (L49) | productivity (O49) |
| nonattainment designations (L49) | emissions (Q52) |
| NAAQS (Q53) | reductions in emissions (Q52) |
| NAAQS (Q53) | costs on manufacturing workers (J32) |
| NAAQS (Q53) | improvements in amenities in compliance counties (H76) |
| NAAQS (Q53) | distribution of benefits (D39) |