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Jobs Versus the Environment: An Industry-level Perspective

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  • Morgenstern, Richard D.
  • Pizer, William A.
  • Shih, Jhih-Shyang

Abstract

The possibility that workers could be adversely affected by environmental policies imposed on heavily regulated industries has led to claims of a "jobs versus the environment" trade-off by both business and labor leaders. The present research examines this claim at the industry level for four heavily polluting industries: pulp and paper mills, plastic manufacturers, petroleum refiners, and iron and steel mills. By focusing on labor effects across an entire industry, we construct a measure relevant to the concerns of key stakeholders, such as labor unions and trade groups. We decompose the link between environmental regulation and employment into three distinct components: factor shifts to more or less labor intensity, changes in total expenditures, and changes in the quantity of output demanded. We use detailed plant-level data to estimate the key parameters describing factor shifts and changes in total expenditures. We then use aggregate time-series data on industry supply shocks and output responses to estimate the demand effect. We find that increased environmental spending generally does not cause a significant change in industry-level employment. Our average across all four industries is a net gain of 1.5 jobs per $1 million in additional environmental spending, with a standard error of 2.2 jobs-an insignificant effect. In the plastics and petroleum sectors, however, there are small but significantly positive effects: 6.9 and 2.2 jobs, respectively, per $1 million in additional expenditures. These effects can be linked to favorable factor shifts-environmental spending is more labor intensive than ordinary production-and relatively inelastic estimated demand.

Suggested Citation

  • Morgenstern, Richard D. & Pizer, William A. & Shih, Jhih-Shyang, 2000. "Jobs Versus the Environment: An Industry-level Perspective," Discussion Papers 10526, Resources for the Future.
  • Handle: RePEc:ags:rffdps:10526
    DOI: 10.22004/ag.econ.10526
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