Regional and Aggregate Economic Consequences of Environmental Policy

Tom Schmitz, Italo Colantone and Gianmarco Ottaviano

No 19221, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper evaluates the economic effects of environmental policy in the presence of general equilibrium spillovers. Focusing on a major change in U.S. air pollution regulations, we combine microeconometric evidence on local and industry-level impacts with a quantitative spatial equilibrium model that captures trade and labor market interactions. Using reduced-form estimates to discipline the model, we quantify aggregate employment and welfare effects that are not identified by partial equilibrium approaches. We find that the policy substantially reduced fine particle emissions, but also led to sizable employment losses. Ignoring general equilibrium spillovers materially overstates job losses in polluting industries while understating employment losses in clean industries. When both economic costs and emission-related amenity gains are taken into account, the welfare benefits of cleaner air dominate.

Keywords: Employment; Trade (search for similar items in EconPapers)
JEL-codes: E24 Q50 Q53 (search for similar items in EconPapers)
Date: 2024-07
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Related works:
Working Paper: Regional and Aggregate Economic Consequences of Environmental Policy (2024)
Working Paper: Regional and aggregate economic consequences of environmental policy (2024)
Working Paper: Regional and aggregate economic consequences of environmental policy (2024)
Working Paper: Regional and Aggregate Economic Consequences of Environmental Policy (2024)
Working Paper: Regional and Aggregate Economic Consequences of Environmental Policy (2024)
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