Working Paper: NBER ID: w8484
Authors: Michael Greenstone
Abstract: This paper estimates the effects of environmental regulations on industrial activity. The analysis is conducted with the most comprehensive data available on both regulations from the Clean Air Act Amendments' division of counties into pollutant-specific nonattainment and attainment categories and manufacturing activity from the 1.75 million plant observations that comprise the 1967-87 Censuses of Manufactures. Emitters of the controlled pollutants are subject to greater regulatory oversight in nonattainment counties. I find that in the first 15 years after the Amendments became law (1972- 1987), nonattainment counties (relative to attainment ones) lost approximately 590,000 jobs, $37 billion in capital stock, and $75 billion (1987$) of output in pollution intensive industries. These estimates are derived from a statistical model for plant-level growth that controls for plant fixed effects, unrestricted industry shocks, and unrestricted county shocks. Importantly these findings are robust across many specifications, and the effects are apparent across a wide range of polluting industries. Although the decline in manufacturing activity was substantial in nonattainment counties, it was modest compared to the size of the entire manufacturing sector.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nonattainment counties (Q39) | decline in industrial activity (L16) |
| nonattainment counties (Q39) | job loss in pollution-intensive industries (Q52) |
| nonattainment counties (Q39) | loss in capital stock in pollution-intensive industries (Q52) |
| nonattainment counties (Q39) | loss in output in pollution-intensive industries (Q52) |
| CAAA designations (C42) | regulatory impact on industrial activity (L51) |