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Manufacturing Plant Location: Does State Pollution Regulation Matter?

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  • Wayne B. Gray

Abstract

This paper tests whether differences across states in pollution regulation affect the location of manufacturing activity in the U.S. Plant-level data from the Census Bureau's Longitudinal Research Database is used to identify new plant births in each state over the 1963-1987 period. This is combined with several measures of state regulatory intensity, including business pollution abatement spending, regulatory enforcement activity, congressional pro-environment voting, and an index of state environmental laws. A significant connection is found: states with more stringent environmental regulation have fewer new manufacturing plants. These results persist across a variety of econometric specifications, and the strongest regulatory coefficients are similar in magnitude to those on other factors expected to influence location, such as unionization rates. However, a subsample of high-pollution industries, which might have been expected to show much larger impacts, gets similar coefficients. This raises the possibility that differences between states other than environmental regulation might be influencing the results.

Suggested Citation

  • Wayne B. Gray, 1997. "Manufacturing Plant Location: Does State Pollution Regulation Matter?," NBER Working Papers 5880, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5880
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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