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When Do Firms Shift Production Across States to Avoid Environmental Regulation?

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Author Info
Wayne B. Gray
Ronald J. Shadbegian

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Abstract

This paper takes a new approach to testing the impact of state environmental regulatory stringency on firms' location decisions, focusing on firms' allocation of production across states. We use Census data for the paper industry to measure the share of each firm's production in each state during 1967-2002. We use a conditional logit model, controlling for a variety of state characteristics that influence firm costs and revenues, and testing several measures of state environmental stringency. Firms allocate significantly smaller production shares to states with stricter regulations, but there is significant heterogeneity across firms in their sensitivity to regulatory stringency. Firms with low compliance rates are more sensitive than firms with high compliance rates, consistent with a model where compliance rates are driven by differences across firms in the costs of compliance, rather than in the benefits of compliance.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8705.

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Date of creation: Jan 2002
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Handle: RePEc:nbr:nberwo:8705

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Find related papers by JEL classification:
D2 - Microeconomics - - Production and Organizations
Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert H Mcguckin & George A Pascoe, 1988. "The Longitudinal Research Database (LRD): Status And Research Possibilities," Working Papers 88-2, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  2. Henderson, J Vernon, 1996. "Effects of Air Quality Regulation," American Economic Review, American Economic Association, vol. 86(4), pages 789-813, September. [Downloadable!] (restricted)
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  3. Barbera, Anthony J & McConnell, Virginia D, 1986. "Effects of Pollution Control on Industry Productivity: A Factor Demand Approach," Journal of Industrial Economics, Blackwell Publishing, vol. 35(2), pages 161-72, December. [Downloadable!] (restricted)
  4. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October. [Downloadable!] (restricted)
  5. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February. [Downloadable!] (restricted)
  6. Boyd, Gale A. & McClelland, John D., 1999. "The Impact of Environmental Constraints on Productivity Improvement in Integrated Paper Plants," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 121-142, September. [Downloadable!] (restricted)
  7. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August. [Downloadable!] (restricted)
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  8. Gray, Wayne B & Shadbegian, Ronald J, 1998. "Environmental Regulation, Investment Timing, and Technology Choice," Journal of Industrial Economics, Blackwell Publishing, vol. 46(2), pages 235-56, June. [Downloadable!] (restricted)
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  9. Deily, Mary E. & Gray, Wayne B., 1991. "Enforcement of pollution regulations in a declining industry," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 260-274, November. [Downloadable!] (restricted)
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  10. Berman, Eli & Bui, Linda T. M., 2001. "Environmental regulation and labor demand: evidence from the South Coast Air Basin," Journal of Public Economics, Elsevier, vol. 79(2), pages 265-295, February. [Downloadable!] (restricted)
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  11. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-74, August. [Downloadable!] (restricted)
  12. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October. [Downloadable!] (restricted)
  13. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December. [Downloadable!] (restricted)
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  1. Jay P. Shimshack & Michael B. Ward, 2004. "Enforcement and Environmental Compliance: A Statistical Analysis of the Pulp and Paper Industry," Discussion Papers Series, Department of Economics, Tufts University 0414, Department of Economics, Tufts University. [Downloadable!]
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