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How Do Energy Prices, and Labor and Environmental Regulations Affect Local Manufacturing Employment Dynamics? A Regression Discontinuity Approach

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  • Matthew E. Kahn
  • Erin T. Mansur

Abstract

Manufacturing industries differ with respect to their energy intensity, labor-to-capital ratio and their pollution intensity. Across the United States, there is significant variation in electricity prices and labor and environmental regulation. This paper uses a regression discontinuity approach to examine whether the basic logic of comparative advantage can explain the geographical clustering of U.S. manufacturing. Using a unified empirical framework, we document that energy-intensive industries concentrate in low electricity price counties, labor-intensive industries avoid pro-union counties, and pollution-intensive industries locate in counties featuring relatively lax Clean Air Act regulation. We use our estimates to predict the likely jobs impacts of regional carbon mitigation efforts.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16538.

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Date of creation: Nov 2010
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Publication status: published as Do Local Energy Prices and Regulation Affect the Geographic Concentration of Employment? (Joint with Erin Mansur), Journal of Public Economics Volume 101, May 2013, Pages 105-114
Handle: RePEc:nbr:nberwo:16538

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  1. Steven J. Davis & Cheryl Grim & John Haltiwanger & Mary Streitwieser, 2008. "Electricity Pricing to U.S. Manufacturing Plants, 1963-2000," NBER Working Papers 13778, National Bureau of Economic Research, Inc.
  2. Joshua Linn, 2009. "Why Do Energy Prices Matter? The Role Of Interindustry Linkages In U.S. Manufacturing," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 549-567, 07.
  3. Kahn, Matthew E., 1997. "Particulate pollution trends in the United States," Regional Science and Urban Economics, Elsevier, vol. 27(1), pages 87-107, February.
  4. Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-49, August.
  5. Berman, E. & Bui, L.T., 1997. "Environmental Regulation and Labor demand: Evidence from the South Coast Air Basin," Papers 82, Boston University - Industry Studies Programme.
  6. Olivier Deschênes, 2011. "Climate Policy and Labor Markets," NBER Chapters, in: The Design and Implementation of U.S. Climate Policy, pages 37-49 National Bureau of Economic Research, Inc.
  7. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
  8. J. Vernon Henderson & Mohammad Arzaghi, 2005. "Networking Off Madison Avenue," Working Papers 05-15, Center for Economic Studies, U.S. Census Bureau.
  9. Stephen P. Holland & Erin T. Mansur, 2007. "Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance," NBER Working Papers 13508, National Bureau of Economic Research, Inc.
  10. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The WSJ on the Costs of State Level Carbon Cap & Trade
    by Matthew E. Kahn in Environmental and Urban Economics on 2011-06-03 14:51:00
  2. Understanding Rising Political Polarization on Climate Change
    by Matthew E. Kahn in Environmental and Urban Economics on 2011-05-07 16:53:00
  3. A Response to Fellow Climate Change Nerds
    by Matthew E. Kahn in Environmental and Urban Economics on 2010-12-28 21:18:00
  4. Unions and Economic Growth
    by Matthew Kahn in the reality-based community on 2011-02-28 15:20:26
  5. My OP-ED Piece about California's Anti-Carbon Legislation
    by Matthew Kahn in Environmental and Urban Economics on 2012-08-16 15:30:00
  6. Will AB32 Lead to Manufacturing Job Loss in California?
    by Matthew E. Kahn in The Reality-Based Community on 2013-01-19 18:53:27
  7. Mexico as a Lead Pollution Haven
    by Matthew E. Kahn in Legal Planet on 2013-02-09 16:05:09
  8. IZA's New Environment and Employment Group
    by Matthew Kahn in Environmental and Urban Economics on 2013-04-23 17:33:00
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Cited by:
  1. Kahn, Matthew E. & Mansur, Erin T., 2013. "Do local energy prices and regulation affect the geographic concentration of employment?," Journal of Public Economics, Elsevier, vol. 101(C), pages 105-114.
  2. Aldy, Joseph Edgar & Pizer, William, 2011. "The Competitiveness Impacts of Climate Change Mitigation Policies," Scholarly Articles 5688779, Harvard Kennedy School of Government.
  3. Wilson, Nathan E., 2012. "Uncertain regulatory timing and market dynamics," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 102-115.
  4. Corey Lang, 2012. "The Dynamics of House Price Capitalization and Locational Sorting: Evidence from Air Quality Changes," Working Papers 12-22, Center for Economic Studies, U.S. Census Bureau.
  5. Huse, Cristian, 2014. "Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy," MPRA Paper 48909, University Library of Munich, Germany.
  6. Zhang, Chuanchuan, 2012. "结婚年龄与婚姻的稳定性:来自断点回归的证据
    [Age at marriage and marital stability: evidence from a regression discontinuity design]
    ," MPRA Paper 38809, University Library of Munich, Germany.
  7. Mario Piacentini, 2012. "Rationale and policies for the green growth of cities and regional economies," International Economics and Economic Policy, Springer, vol. 9(2), pages 129-146, June.

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