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How Do Energy Prices, and Labor and Environmental Regulations Affect Local Manufacturing Employment Dynamics? A Regression Discontinuity Approach

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  • Matthew E. Kahn
  • Erin T. Mansur

Abstract

Manufacturing industries differ with respect to their energy intensity, labor-to-capital ratio and their pollution intensity. Across the United States, there is significant variation in electricity prices and labor and environmental regulation. This paper uses a regression discontinuity approach to examine whether the basic logic of comparative advantage can explain the geographical clustering of U.S. manufacturing. Using a unified empirical framework, we document that energy-intensive industries concentrate in low electricity price counties, labor-intensive industries avoid pro-union counties, and pollution-intensive industries locate in counties featuring relatively lax Clean Air Act regulation. We use our estimates to predict the likely jobs impacts of regional carbon mitigation efforts.

Suggested Citation

  • Matthew E. Kahn & Erin T. Mansur, 2010. "How Do Energy Prices, and Labor and Environmental Regulations Affect Local Manufacturing Employment Dynamics? A Regression Discontinuity Approach," NBER Working Papers 16538, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16538
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    File URL: http://www.nber.org/papers/w16538.pdf
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    References listed on IDEAS

    as
    1. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
    2. Berman, Eli & Bui, Linda T. M., 2001. "Environmental regulation and labor demand: evidence from the South Coast Air Basin," Journal of Public Economics, Elsevier, vol. 79(2), pages 265-295, February.
    3. Steven Davis & Cheryl Grim & John Haltiwanger & Mary Streitwieser, 2007. "Electricity Pricing to U.S. Manufacturing Plants, 1963-2000," Working Papers 07-28, Center for Economic Studies, U.S. Census Bureau.
    4. Stephen P. Holland & Erin T. Mansur, 2008. "Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 550-561, August.
    5. Kahn, Matthew E., 1997. "Particulate pollution trends in the United States," Regional Science and Urban Economics, Elsevier, vol. 27(1), pages 87-107, February.
    6. Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-449, August.
    7. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
    8. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
    9. Olivier Deschênes, 2011. "Climate Policy and Labor Markets," NBER Chapters,in: The Design and Implementation of U.S. Climate Policy, pages 37-49 National Bureau of Economic Research, Inc.
    10. Joshua Linn, 2009. "Why Do Energy Prices Matter? The Role Of Interindustry Linkages In U.S. Manufacturing," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 549-567, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The WSJ on the Costs of State Level Carbon Cap & Trade
      by Matthew E. Kahn in Environmental and Urban Economics on 2011-06-03 19:51:00
    2. Understanding Rising Political Polarization on Climate Change
      by Matthew E. Kahn in Environmental and Urban Economics on 2011-05-07 21:53:00
    3. A Response to Fellow Climate Change Nerds
      by Matthew E. Kahn in Environmental and Urban Economics on 2010-12-29 03:18:00
    4. Unions and Economic Growth
      by Matthew Kahn in the reality-based community on 2011-02-28 21:20:26
    5. My OP-ED Piece about California's Anti-Carbon Legislation
      by Matthew Kahn in Environmental and Urban Economics on 2012-08-16 20:30:00
    6. Will AB32 Lead to Manufacturing Job Loss in California?
      by Matthew E. Kahn in The Reality-Based Community on 2013-01-20 00:53:27
    7. Mexico as a Lead Pollution Haven
      by Matthew E. Kahn in Legal Planet on 2013-02-09 22:05:09
    8. IZA's New Environment and Employment Group
      by Matthew Kahn in Environmental and Urban Economics on 2013-04-23 22:33:00

    Citations

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    Cited by:

    1. Lang, Corey, 2015. "The dynamics of house price responsiveness and locational sorting: Evidence from air quality changes," Regional Science and Urban Economics, Elsevier, vol. 52(C), pages 71-82.
    2. Huse, Cristian, 2014. "Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy," MPRA Paper 48909, University Library of Munich, Germany.
    3. Abel Schumann, 2014. "Persistence of Population Shocks: Evidence from the Occupation of West Germany after World War II," American Economic Journal: Applied Economics, American Economic Association, vol. 6(3), pages 189-205, July.
    4. Joseph E. Aldy & William A. Pizer, 2015. "The Competitiveness Impacts of Climate Change Mitigation Policies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(4), pages 565-595.
    5. Mario Piacentini, 2012. "Rationale and policies for the green growth of cities and regional economies," International Economics and Economic Policy, Springer, vol. 9(2), pages 129-146, June.
    6. Kahn, Matthew E. & Mansur, Erin T., 2013. "Do local energy prices and regulation affect the geographic concentration of employment?," Journal of Public Economics, Elsevier, vol. 101(C), pages 105-114.
    7. Corey Lang, 2012. "The Dynamics of House Price Capitalization and Locational Sorting: Evidence from Air Quality Changes," Working Papers 12-22, Center for Economic Studies, U.S. Census Bureau.
    8. Wilson, Nathan E., 2012. "Uncertain regulatory timing and market dynamics," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 102-115.
    9. Zhang, Chuanchuan, 2012. "结婚年龄与婚姻的稳定性:来自断点回归的证据
      [Age at marriage and marital stability: evidence from a regression discontinuity design]
      ," MPRA Paper 38809, University Library of Munich, Germany.
    10. repec:spr:envpol:v:20:y:2018:i:3:d:10.1007_s10018-017-0204-7 is not listed on IDEAS

    More about this item

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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