Impact of Pollution Abatement Costs on Manufacturing Employment in the U.S

This study empirically investigates whether pollution abatement costs have a negative impact on manufacturing employment in the U.S. Given that during the last quarter of a century, spending on environmental protection in the U.S. has grown even faster than has spending on healthcare, the social costs of pollution abatement efforts warrant attention. Conventional microeconomic theory suggests that there is a trade-off between environmental protection expenses and manufacturing activity, i.e., higher pollution abatement compliance costs borne by industries may contribute to plant shutdowns, lower production levels, and/or lack of investment, thereby leading to layoffs. However, improved environmental conditions may facilitate economic growth in regions with less pollution by attracting migration and may also serve to improve health status of its residents as well as help to protect the integrity of the environment. In any case, the existing literature offers no consensus on the impact of environmental protective measures on manufacturing employment in the U.S. Applying crosssectional analysis for all 50 states for year 2000, this study fi nds empirical that pollution abatement costs have a statistically signifi cant negative effect on employment in the U.S. manufacturing sector.