Pollution Incidence and Political Jurisdiction - Environmental and Resource Economics - Lecture Slides, Slides of Environmental Economics

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Pollution Incidence and Political

Jurisdiction: Evidence from the TRI

Objective• Investigate role of jurisdictional or boundary

consideration in determining the stringencyof environmental law– Race to the bottom: local regulator is lenient if

pollution goes outside of the state so that borderpollution facilities are less stringently regulated

• Regulator consideration
  • residents prefer stringent regulations while polluters

object to those

• Revenues stay within the state while pollutions

externality impose on neighboring states

Theoretical Model• Local Regulator maximize the external

support

M ( minimize opposition)

by setting

the stringency of environmental regulation

s

• Modified Magat et al’s external signal model

Theoretical Model^ M

=

nf

[

α

v (

s )] –

meh

[ t

( s

/ m

)]

n

: number of citizens v()

: damage each citizen suffer from pollution allowed by standard

s

f()

: probability of sending supporting signal by citizen α

:^

proportion of total harm affecting local residents m

: number of polluters t()

: cost of compliance h[]

: firm’s possibility to send opposition signal e : relative strength of industry’s signal Smaller the s, more stringent the regulation

Hypotheses

Pollutant pathway matters

Empirical Model

• Explanatory: -^

α

: Border or not (state, ocean)

-^

n

: Population number

-^

f : Income level, Poverty level, Race

-^

m

: Firm numbers

-^

h

: firm with less employees

-^

e : employees in manufacturing

• Inspection (exogenous), availability of alternative

treatment methods

• Industry dummy, year dummy, county area

Estimation

• Hausman and Taylor Model
  • Endogeneity (location and unobserved factor)– Time variant and time-invariant variables

Conclusion and Implication• Jurisdiction matters in determining the

pollution level– Enforcement problem? Maybe Not– State writes less restrictive permits or

grandfathering near the border

Further Research• How to avoid externality exporting• What is efficient emission level

• Not be uniform around the nation– Unclear which way leads to higher social

welfare: suboptimal local decision onenvironmental quality or inefficient uniformnational standard