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Socioeconomic Disparities in Privatized Pollution Remediation: Evidence from Toxic Chemical Spills

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  • Justin Marion
  • Jeremy West

Abstract

Governments often privatize the administration of regulations to third-party specialists paid for by the regulated parties. We study how the resulting conflict of interest can have unintended consequences for the distributional impacts of regulation. In Massachusetts, the party responsible for hazardous waste contamination must hire a licensed contractor to quantify the environmental severity. We find that contractors' evaluations favor their clients, exhibiting substantial score bunching just below thresholds that determine government oversight of the remediation. Client favoritism is more pronounced in socioeconomically disadvantaged neighborhoods and is associated with inferior remediation quality, highlighting a novel channel for inequities in pollution exposure.

Suggested Citation

  • Justin Marion & Jeremy West, 2024. "Socioeconomic Disparities in Privatized Pollution Remediation: Evidence from Toxic Chemical Spills," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 219-249, July.
    • Handle: RePEc:aea:aejapp:v:16:y:2024:i:3:p:219-49
    DOI: 10.1257/app.20220295
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    References listed on IDEAS

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    1. Zhao Chen & Zhikuo Liu & Juan Carlos Suárez Serrato & Daniel Yi Xu, 2021. "Notching R&D Investment with Corporate Income Tax Cuts in China," American Economic Review, American Economic Association, vol. 111(7), pages 2065-2100, July.
    2. Rebecca Diamond & Petra Persson, 2016. "The Long-term Consequences of Teacher Discretion in Grading of High-stakes Tests," NBER Working Papers 22207, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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