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Why Is Pollution from US Manufacturing Declining? The Roles of Environmental Regulation, Productivity, and Trade

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  • Joseph S. Shapiro
  • Reed Walker

Abstract

Between 1990 and 2008, air pollution emissions from U.S. manufacturing fell by 60 percent despite a substantial increase in manufacturing output. We show that these emissions reductions are primarily driven by within-product changes in emissions intensity rather than changes in output or in the composition of products produced. We then develop and estimate a quantitative model linking trade with the environment to better understand the economic forces driving these changes. Our estimates suggest that the implicit pollution tax that manufacturers face doubled between 1990 and 2008. These changes in environmental regulation, rather than changes in productivity and trade, account for most of the emissions reductions.

Suggested Citation

  • Joseph S. Shapiro & Reed Walker, 2018. "Why Is Pollution from US Manufacturing Declining? The Roles of Environmental Regulation, Productivity, and Trade," American Economic Review, American Economic Association, vol. 108(12), pages 3814-3854, December.
  • Handle: RePEc:aea:aecrev:v:108:y:2018:i:12:p:3814-54
    Note: DOI: 10.1257/aer.20151272
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    Cited by:

    1. Julien Wolfersberger, 2019. "Growth and the environment: taking into account structural transformation," Working Papers hal-02156298, HAL.
    2. Francesco Vona & Giovanni Marin & Davide Consoli & David Popp, 2018. "Environmental Regulation and Green Skills: An Empirical Exploration," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 713-753.
    3. Mario Larch & Joschka Wanner, 2019. "The Consequences of Unilateral Withdrawals from the Paris Agreement," CESifo Working Paper Series 7804, CESifo Group Munich.
    4. Geoffrey Barrows & Helene Ollivier, 2018. "Foreign Demand and Greenhouse Gas Emissions: Empirical Evidence with Implications for Leakage," Working Papers 2018.16, FAERE - French Association of Environmental and Resource Economists.
    5. Francesco Lamperti & Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Alessandro Sapio, 2018. "And Then He Wasn't a She: Climate Change and Green Transitions in an Agent-Based Integrated Assessment Model," LEM Papers Series 2018/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    6. Francesco Vona & Giovanni Marin & Davide Consoli, 2019. "Measures, drivers and effects of green employment: evidence from US local labor markets, 2006–2014," Journal of Economic Geography, Oxford University Press, vol. 19(5), pages 1021-1048.
    7. Francesco Lamperti & Mauro Napoletano & Andrea Roventini, 2019. "Green transitions and the prevention of environmental disasters : market based vs command-and-control policies," Sciences Po publications info:hdl:2441/14g286e42n8, Sciences Po.
    8. Geoffrey Barrows & Helene Ollivier, 2016. "Emission intensity and firm dynamics: reallocation, product mix, and technology in India," GRI Working Papers 245, Grantham Research Institute on Climate Change and the Environment.
    9. Giovanni Marin & Francesco Vona, 2017. "The Impact of Energy Prices on Employment and Environmental Performance: Evidence from French Manufacturing Establishments," Working Papers 2017.53, Fondazione Eni Enrico Mattei.
    10. Francesco Vona & Giovanni Marin & Davide Consoli & David Popp, 2015. "Green Skills," Working Papers 2015.72, Fondazione Eni Enrico Mattei.
    11. Andersen, Dana C., 2016. "Accounting for Firm Exit and Loss of Variety in the Welfare Cost of Regulations," Working Papers 2016-9, University of Alberta, Department of Economics.
    12. Janet Currie & Reed Walker, 2019. "What Do Economists Have to Say about the Clean Air Act 50 Years after the Establishment of the Environmental Protection Agency?," Journal of Economic Perspectives, American Economic Association, vol. 33(4), pages 3-26, Fall.
    13. Michael L. Polemis & Thanasis Stengos, 2019. "Does competition prevent industrial pollution? Evidence from a panel threshold model," Business Strategy and the Environment, Wiley Blackwell, vol. 28(1), pages 98-110, January.
    14. Feng Liu & Kangning Xu & Meina Zheng, 2018. "The Effect of Environmental Regulation on Employment in China: Empirical Research Based on Individual-Level Data," Sustainability, MDPI, Open Access Journal, vol. 10(7), pages 1-23, July.
    15. Inácio Araúgo & Randall Jackson & Amir B. Ferreira Neto & Fernando Perobelli, 2018. "Environmental Costs of European Union Membership: A Structural Decomposition Analysis," Working Papers Working Paper 2018-04, Regional Research Institute, West Virginia University.
    16. de Haas, Ralph & Popov, Alexander, 2019. "Finance and Carbon Emissions," CEPR Discussion Papers 14012, C.E.P.R. Discussion Papers.
    17. Enrico Maria de Angelis & Marina Di Giacomo & Davide Vannoni, 2019. "Climate Change and Economic Growth: The Role of Environmental Policy Stringency," Sustainability, MDPI, Open Access Journal, vol. 11(8), pages 1-15, April.
    18. Dana C. Andersen, 2016. "Credit Constraints, Technology Upgrading, and the Environment," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 283-319.
    19. Qirjo, Dhimitri & Pascalau, Razvan & Krichevskiy, Dmitriy, 2019. "CETA and Air Pollution," MPRA Paper 95608, University Library of Munich, Germany.
    20. Larch, Mario & Wanner, Joschka, 2017. "Carbon tariffs: An analysis of the trade, welfare, and emission effects," Journal of International Economics, Elsevier, vol. 109(C), pages 195-213.
    21. Andersen, Dana C., 2017. "Default Risk, Productivity, and the Environment: Theory and Evidence from U.S. Manufacturing," Working Papers 2017-8, University of Alberta, Department of Economics.
    22. Arik Levinson & James O'Brien, 2015. "Environmental Engel Curves," NBER Working Papers 20914, National Bureau of Economic Research, Inc.
    23. Yuyi Chen & Yunong Li & Jie Yan, 2019. "Tracing Air Pollutant Emissions in China: Structural Decomposition and GVC Accounting," Sustainability, MDPI, Open Access Journal, vol. 11(9), pages 1-21, May.
    24. Brunel, Claire & Johnson, Erik Paul, 2019. "Two birds, one stone? Local pollution regulation and greenhouse gas emissions," Energy Economics, Elsevier, vol. 78(C), pages 1-12.

    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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