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Firm Presence, Pollution, and Agglomeration: Evidence from a Randomized Environmental Place-Based Policy

Author

Listed:
  • Michael Gechter
  • Namrata Kala

Abstract

Firm location decisions impose externalities on other firms due to competitive or agglomerative forces, and on the environment. We study an environmental place-based policy that randomly moved 20,000 firms in New Delhi. Relocation reduces pollution, but firm exit increases. We combine the exogenous assignment of firms to industrial plots with a model to estimate spillovers on neighboring firms, showing that firm survival rates could have been increased by allocating firms to plots accounting for input-output linkages. These results provide causal evidence on how firm presence impacts environmental quality, and how spillovers can be used to minimize costs on regulated firms.

Suggested Citation

  • Michael Gechter & Namrata Kala, 2025. "Firm Presence, Pollution, and Agglomeration: Evidence from a Randomized Environmental Place-Based Policy," NBER Working Papers 33707, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33707
    Note: DEV EEE
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    Cited by:

    1. Kala, Namrata & Haseeb, Muhammad & Fenske, James, 2025. "Environmental Permits, Regulatory Burden, and Firm Outcomes," CAGE Online Working Paper Series 784, Competitive Advantage in the Global Economy (CAGE).
    2. Chaurey, Ritam & Nayyar, Guarav & Sharma, Siddharth & Verhoogen, Eric, 2025. "Social Learning among Urban Manufacturing Firms: Energy-Efficient Motors in Bangladesh," IZA Discussion Papers 18183, IZA Network @ LISER.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • 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
    • 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
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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