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Does Ambient Water Quality Affect the Stringency of Regulations? Plant-Level Evidence of the Clean Water Act

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  • Lopamudra Chakraborti
  • Kenneth E. McConnell

Abstract

This paper provides evidence that the Clean Water Act implemented through effluent limits responded to local water quality. We choose biological oxygen demand as the pollutant and dissolved oxygen as a water quality indicator. We use a panel of permits for 100 plants in Maryland, Virginia, and Pennsylvania for 1990 to 2004. We estimate that decline in water quality by 1 mg/L lowers permits by 5 mg/L. This finding demonstrates greater flexibility than might be expected in an effluent standards–based approach. It suggests efficient resource use, with permits relaxed with water quality improvements and tightened with water quality declines.

Suggested Citation

  • Lopamudra Chakraborti & Kenneth E. McConnell, 2012. "Does Ambient Water Quality Affect the Stringency of Regulations? Plant-Level Evidence of the Clean Water Act," Land Economics, University of Wisconsin Press, vol. 88(3), pages 518-535.
  • Handle: RePEc:uwp:landec:v:88:y:2012:iii:1:p:518-535
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    References listed on IDEAS

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    1. Gray, Wayne B. & Shadbegian, R.J.Ronald J., 2004. "'Optimal' pollution abatement--whose benefits matter, and how much?," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 510-534, May.
    2. Bandyopadhyay Sushenjit & Horowitz John, 2006. "Do Plants Overcomply with Water Pollution Regulations? The Role of Discharge Variability," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-32, January.
    3. John D. McClelland & John K. Horowitz, 1999. "The Costs of Water Pollution Regulation in the Pulp and Paper Industry," Land Economics, University of Wisconsin Press, vol. 75(2), pages 220-232.
    4. McConnell, Virginia D. & Schwarz, Gregory E., 1992. "The supply and demand for pollution control: Evidence from wastewater treatment," Journal of Environmental Economics and Management, Elsevier, vol. 23(1), pages 54-77, July.
    5. James T. Hamilton & W. Kip Viscusi, 1999. "Are Risk Regulators Rational? Evidence from Hazardous Waste Cleanup Decisions," American Economic Review, American Economic Association, vol. 89(4), pages 1010-1027, September.
    6. Earnhart, Dietrich, 2004. "Regulatory factors shaping environmental performance at publicly-owned treatment plants," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 655-681, July.
    7. Freeman, A. Myrick, III, 2002. "Environmental Policy Since Earth Day I: What Do We Know About the Benefits and Costs?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 31(1), April.
    8. A. Myrick Freeman III, 2002. "Environmental Policy Since Earth Day I: What Have We Gained?," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 125-146, Winter.
    9. Michael R. Moore & Elizabeth B. Maclin & David W. Kershner, 2001. "Testing Theories of Agency Behavior: Evidence from Hydropower Project Relicensing Decisions of the Federal Energy Regulatory Commission," Land Economics, University of Wisconsin Press, vol. 77(3), pages 423-442.
    10. Dietrich Earnhart, 2004. "Panel Data Analysis of Regulatory Factors Shaping Environmental Performance," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 391-401, February.
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    Cited by:

    1. Chakraborti, Lopamudra, 2016. "Do plants’ emissions respond to ambient environmental quality? Evidence from the clean water act," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 55-69.
    2. Zhao Chen & Matthew E. Kahn & Yu Liu & Zhi Wang, 2016. "The Consequences of Spatially Differentiated Water Pollution Regulation in China," NBER Working Papers 22507, National Bureau of Economic Research, Inc.
    3. repec:eee:pubeco:v:150:y:2017:i:c:p:53-74 is not listed on IDEAS
    4. repec:eee:jeeman:v:88:y:2018:i:c:p:468-485 is not listed on IDEAS
    5. Cohen, Alex & Keiser, David, 2016. "The Effectiveness of Overlapping Pollution Regulation: Evidence from the Ban on Phosphate in Dishwasher Detergent," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235533, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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