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Location Decisions of U.S. Polluting Plants: Theory, Empirical Evidence, and Consequences

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Author Info

  • Ronald J. Shadbegian
  • Ann Wolverton

Abstract

Economists have long been interested in explaining the spatial distribution of economic activity, focusing on what factors motivate profit-maximizing firms when they choose to open a new plant or expand an existing facility. We begin our paper with a general discussion of the theory of plant location, including the role of taxes and agglomeration economies. However, our paper focuses on the theory, evidence, and implications of the role of environmental regulations in plant location decisions. On its face, environmental regulation would not necessarily be expected to alter location decisions, since we would expect Federal regulation to affect all locations in the United States essentially equally. It turns out, however, that this is not always the case as some geographic areas are subject to greater stringency. Another source of variation is differences across states in the way they implement and enforce compliance with Federal regulation. In light of these spatial differences in the costs of complying with environmental regulations, we discuss three main questions in this survey: Do environmental regulations affect the location decisions of polluting plants? Do states compete for polluting plants through differences in environmental regulation? And, do firms locate polluting plants disproportionately near poor and minority neighborhoods?

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File URL: http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2010-05/$File/2010-05.PDF
File Function: First version, 2010
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Bibliographic Info

Paper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 201005.

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Length: 51 pages
Date of creation: May 2010
Date of revision: May 2010
Handle: RePEc:nev:wpaper:wp201005

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Related research

Keywords: plant location decisions; environmental policy; inter-jurisdictional competition; environmental justice;

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Cited by:
  1. Daniel L. Millimet & Jayjit Roy, 2011. "Three New Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous," Working Papers 11-10, Department of Economics, Appalachian State University.
  2. Sunghoon Chung, 2012. "Environmental Regulation and the Pattern of Outward FDI: An Empirical Assessment of the Pollution Haven Hypothesis," Departmental Working Papers 1203, Southern Methodist University, Department of Economics.

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