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Economic Geography and the Efficiency of Environmental Regulation

Author

Listed:
  • Alex Hollingsworth
  • Taylor Jaworski
  • Carl Kitchens
  • Ivan J. Rudik

Abstract

We develop a quantitative economic geography model with endogenous emissions, amenities, trade, and labor reallocation to evaluate the spatial impact of the leading air quality regulation in the United States: the National Ambient Air Quality Standards (NAAQS). We find that the NAAQS generate $40 billion in annual welfare gains. The gains are spatially concentrated in a small set of cities targeted by the NAAQS, and the improved amenities attract large numbers of nonmanufacturing workers into these areas. We use our model to analyze counterfactual policies and find that using first-best emissions pricing increases welfare by an additional $70 billion per year. Atmospheric transport of emissions, labor reallocation, and trade are first-order factors for quantifying the level and distribution of the costs and benefits of the NAAQS.

Suggested Citation

  • Alex Hollingsworth & Taylor Jaworski & Carl Kitchens & Ivan J. Rudik, 2022. "Economic Geography and the Efficiency of Environmental Regulation," NBER Working Papers 29845, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29845
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    Cited by:

    1. Tom Schmitz & Italo Colantone & Gianmarco Ottaviano, 2024. "Regional and Aggregate Economic Consequences of Environmental Policy," Working Papers 2024.10, Fondazione Eni Enrico Mattei.
    2. Chen, ShiYi & Liang, EnDong & Liu, ChaoLiang, 2025. "“Size-dependent” environmental regulations and spatial labor allocation," Journal of Environmental Economics and Management, Elsevier, vol. 132(C).
    3. Lutz Sager & Gregor Singer, 2025. "Clean Identification? The Effects of the Clean Air Act on Air Pollution, Exposure Disparities, and House Prices," American Economic Journal: Economic Policy, American Economic Association, vol. 17(1), pages 1-36, February.
    4. Tom Schmitz & Italo Colantone & Gianmarco Ottaviano, 2024. "Regional and Aggregate Economic Consequences of Environmental Policy Abstract: This paper shows how to combine microeconometric evidence on the effects of environmental policy with a macroeconomic model, accounting for general equilibrium spillovers ," BAFFI CAREFIN Working Papers 24225, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    5. Marc A.C. Hafstead & Roberton C. Williams III, 2026. "Modeling the Labor Implications of the Energy Transition," NBER Working Papers 34723, National Bureau of Economic Research, Inc.
    6. repec:osf:socarx:qy76a_v1 is not listed on IDEAS

    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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