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Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences

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Between 1990 and 2008, air pollution emissions from U.S. manufacturing fell by 60 percent despite a substantial increase in manufacturing output. We show that these emissions reductions are primarily driven by within-product changes in emissions intensity rather than changes in output or in the composition of products produced. We then develop and estimate a quantitative model linking trade with the environment to better understand the economic forces driving these changes. Our estimates suggest that the implicit pollution tax that manufacturers face doubled between 1990 and 2008. These changes in environmental regulation, rather than changes in productivity and trade, account for most of the emissions reductions.

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  • Joseph S. Shapiro & Reed Walker, 2015. "Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences," Cowles Foundation Discussion Papers 1982R, Cowles Foundation for Research in Economics, Yale University, revised Sep 2016.
  • Handle: RePEc:cwl:cwldpp:1982r
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    Cited by:

    1. Agarwal, Sumit & Deng, Yongheng & Li, Teng, 2019. "Environmental regulation as a double-edged sword for housing markets: Evidence from the NOx Budget Trading Program," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 286-309.
    2. Lamperti, Francesco & Napoletano, Mauro & Roventini, Andrea, 2020. "Green Transitions And The Prevention Of Environmental Disasters: Market-Based Vs. Command-And-Control Policies," Macroeconomic Dynamics, Cambridge University Press, vol. 24(7), pages 1861-1880, October.
    3. E. Mark Curtis, 2014. "Who Loses Under Power Plant Cap-and-Trade Programs?," NBER Working Papers 20808, National Bureau of Economic Research, Inc.
    4. Francesco Vona & Giovanni Marin & Davide Consoli & David Popp, 2018. "Environmental Regulation and Green Skills: An Empirical Exploration," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 713-753.
    5. Brian R. Copeland & M. Scott Taylor, 2017. "Environmental and resource economics: A Canadian retrospective," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1381-1413, December.
    6. Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 136-142, May.
    7. Dana C. Andersen, 2016. "Credit Constraints, Technology Upgrading, and the Environment," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 283-319.
    8. Larch, Mario & Wanner, Joschka, 2017. "Carbon tariffs: An analysis of the trade, welfare, and emission effects," Journal of International Economics, Elsevier, vol. 109(C), pages 195-213.
    9. Cherniwchan, Jevan, 2017. "Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing," Journal of International Economics, Elsevier, vol. 105(C), pages 130-149.
    10. Francesco Lamperti & Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Alessandro Sapio, 2018. "And then he wasn't a she : Climate change and green transitions in an agent-based integrated assessment model," Sciences Po publications 28, Sciences Po.
    11. Michael L. Polemis & Thanasis Stengos, 2019. "Does competition prevent industrial pollution? Evidence from a panel threshold model," Business Strategy and the Environment, Wiley Blackwell, vol. 28(1), pages 98-110, January.
    12. Francesco Vona & Giovanni Marin & Davide Consoli, 2019. "Measures, drivers and effects of green employment: evidence from US local labor markets, 2006–2014," Journal of Economic Geography, Oxford University Press, vol. 19(5), pages 1021-1048.
    13. Geoffrey Barrows & Helene Ollivier, 2016. "Emission intensity and firm dynamics: reallocation, product mix, and technology in India," GRI Working Papers 245, Grantham Research Institute on Climate Change and the Environment.
    14. Giovanni Marin & Francesco Vona, 2017. "The Impact of Energy Prices on Employment and Environmental Performance: Evidence from French Manufacturing Establishments," Working Papers 2017.53, Fondazione Eni Enrico Mattei.
    15. Dana C. Andersen, 2020. "Default Risk, Productivity, and the Environment: Theory and Evidence from U.S. Manufacturing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 677-710, April.
    16. Andersen, Dana C., 2016. "Accounting for Firm Exit and Loss of Variety in the Welfare Cost of Regulations," Working Papers 2016-9, University of Alberta, Department of Economics.
    17. Lamperti, F. & Dosi, G. & Napoletano, M. & Roventini, A. & Sapio, A., 2020. "Climate change and green transitions in an agent-based integrated assessment model," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    18. Brian R. Copeland & M. Scott Taylor, 2017. "Environmental and resource economics: A Canadian retrospective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1381-1413, December.
    19. Arik Levinson & James O'Brien, 2015. "Environmental Engel Curves," NBER Working Papers 20914, National Bureau of Economic Research, Inc.
    20. Brunel, Claire & Johnson, Erik Paul, 2019. "Two birds, one stone? Local pollution regulation and greenhouse gas emissions," Energy Economics, Elsevier, vol. 78(C), pages 1-12.
    21. Feng Liu & Kangning Xu & Meina Zheng, 2018. "The Effect of Environmental Regulation on Employment in China: Empirical Research Based on Individual-Level Data," Sustainability, MDPI, Open Access Journal, vol. 10(7), pages 1-23, July.
    22. Inácio Araúgo & Randall Jackson & Amir B. Ferreira Neto & Fernando Perobelli, 2018. "Environmental Costs of European Union Membership: A Structural Decomposition Analysis," Working Papers Working Paper 2018-04, Regional Research Institute, West Virginia University.
    23. Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 136-142, May.

    More about this item

    Keywords

    Cap-and-trade; Market-based instruments; NOx Budget Program; Pollution; Productivity; Trade;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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