Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions
The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the...
| Main Authors: | , , |
|---|---|
| Format: | Working Paper |
| Published: |
Cambridge, MA: Department of Economics, Massachusetts Institute of Technology
2012
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/72655 |
| _version_ | 1826216475995668480 |
|---|---|
| author | Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. |
| author_facet | Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. |
| author_sort | Deschênes, Olivier |
| collection | MIT |
| description | The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters. Carbon monoxide regulations, on the other hand, appear to increase measured TFP, especially among refineries. The application of corrections for the confounding of price increases and output declines and sample selection on survival produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, which is about 8.8 percent of manufacturing sector profits in this period. |
| first_indexed | 2024-09-23T16:48:18Z |
| format | Working Paper |
| id | mit-1721.1/72655 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T16:48:18Z |
| publishDate | 2012 |
| publisher | Cambridge, MA: Department of Economics, Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/726552019-04-12T21:04:56Z Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. willingness to pay for air quality cap and trade ozone pharmaceuticals mortality compensatory behavior human health The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters. Carbon monoxide regulations, on the other hand, appear to increase measured TFP, especially among refineries. The application of corrections for the confounding of price increases and output declines and sample selection on survival produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, which is about 8.8 percent of manufacturing sector profits in this period. 2012-09-11T22:35:43Z 2012-09-11T22:35:43Z 2012-07-15 Working Paper http://hdl.handle.net/1721.1/72655 Working paper, Massachusetts Institute of Technology, Dept. of Economics;12-18 An error occurred on the license name. An error occurred getting the license - uri. application/pdf Cambridge, MA: Department of Economics, Massachusetts Institute of Technology |
| spellingShingle | willingness to pay for air quality cap and trade ozone pharmaceuticals mortality compensatory behavior human health Deschênes, Olivier Greenstone, Michael Shapiro, Joseph S. Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_full | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_fullStr | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_full_unstemmed | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_short | Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions |
| title_sort | defensive investments and the demand for air quality evidence from the nox budget program and ozone reductions |
| topic | willingness to pay for air quality cap and trade ozone pharmaceuticals mortality compensatory behavior human health |
| url | http://hdl.handle.net/1721.1/72655 |
| work_keys_str_mv | AT deschenesolivier defensiveinvestmentsandthedemandforairqualityevidencefromthenoxbudgetprogramandozonereductions AT greenstonemichael defensiveinvestmentsandthedemandforairqualityevidencefromthenoxbudgetprogramandozonereductions AT shapirojosephs defensiveinvestmentsandthedemandforairqualityevidencefromthenoxbudgetprogramandozonereductions |