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

Author

Listed:
  • Wayne B. Gray
  • Ron Shadbegian

Abstract

This article tests the impact of state environmental regulatory stringency on firms’ allocation of production across states using plant-level U.S. Census data for the paper industry during 1967–2012. We model firms’ production shares in each state with a conditional logit specification, testing several measures of state regulatory stringency and controlling for other state characteristics. Firms with relatively low compliance rates are more likely to avoid stringent states compared to firms with the highest compliance rates. This is consistent with our theoretical model when firms’ compliance decisions are affected more by differences across their costs, rather than their benefits, of compliance.

Suggested Citation

  • Wayne B. Gray & Ron Shadbegian, 2024. "When Do Firms Shift Production across States to Avoid Environmental Regulation?," Land Economics, University of Wisconsin Press, vol. 100(3), pages 443-457.
    • Handle: RePEc:uwp:landec:v:100:y:2024:i:3:p:443-457
    Note: DOI: https://doi.org/10.3368/le.100.3.071921-0084R
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    Citations

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    Cited by:

    1. Ross, Martin T. & Gallaher, Michael P. & Murray, Brian C. & Throneburg, Wanda W. & Levinson, Arik, 2004. "PACE Survey: Background, Applications, and Data Quality Issues," National Center for Environmental Economics-NCEE Working Papers 280837, United States Environmental Protection Agency (EPA).
    2. Shu-Chen Chang, 2015. "Threshold effect of foreign direct investment on environmental degradation," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 14(1), pages 75-102, December.
    3. Cole, Matthew A. & Elliott, Robert J.R. & Wu, Shanshan, 2008. "Industrial activity and the environment in China: An industry-level analysis," China Economic Review, Elsevier, vol. 19(3), pages 393-408, September.
    4. 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.
    5. Shimshack, Jay P. & Ward, Michael B., 2005. "Regulator reputation, enforcement, and environmental compliance," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 519-540, November.
    6. Fei Han & Junming Li, 2022. "Spatial Pattern and Spillover of Abatement Effect of Chinese Environmental Protection Tax Law on PM 2.5 Pollution," IJERPH, MDPI, vol. 19(3), pages 1-16, January.
    7. Cole, Matthew A. & Elliott, Robert J.R. & Shimamoto, Kenichi, 2005. "Industrial characteristics, environmental regulations and air pollution: an analysis of the UK manufacturing sector," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 121-143, July.
    8. Shuochen Luan & Jian Li, 2025. "The Impact of Foreign Direct Investment and Environmental Regulation on Urban Sustainable Competitiveness: Evidence from Chinese Cities," Sustainability, MDPI, vol. 17(8), pages 1-20, April.
    9. You Wu & Jichuan Sheng & Fang Huang, 2015. "China’s future investments in environmental protection and control of manufacturing industry: lessons from developed countries," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 77(3), pages 1889-1901, July.
    10. Rijal, Binish & Khanna, Neha, 2020. "High priority violations and intra-firm pollution substitution," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).

    More about this item

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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