Firm internal network, environmental regulation, and plant death

Jingbo Cui () and GianCarlo Moschini

Journal of Environmental Economics and Management, 2020, vol. 101, issue C

Abstract: This article examines the role of a firm’s internal network in determining plant shutdown decisions in response to environmental regulations. Using unique plant-level data for U.S. manufacturing industries from 1990 to 2007, we find evidence that, in response to increasingly stringent environmental regulations at the county level, multi-plant firms do exercise their greater flexibility in adjusting production, relative to single-plant firms. Specifically, in regulated counties, the likelihood of a plant shutting down is higher for multi-plant firms. Moreover, we measure the firm internal network effect at the local, neighborhood, and the wider-area levels, as defined by the number of affiliated plants clustered in different regional levels. Their effects on plant closure decisions for dirty subsidiaries vary with the network level. We further decompose the neighborhood network into those in regulated and unregulated neighborhood counties, and examine how these network metrics are associated with closure decisions of dirty plants affiliated with multi-plant firms. The presence of more sibling plants residing in neighboring counties that are free from regulatory controls are associated with a higher closure probability of dirty plants in a regulated county.

Keywords: Agglomeration; Clean air act amendments; Multinationals; Multi-plant firms; Network effects (search for similar items in EconPapers)
JEL-codes: F18 Q56 R11 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Firm Internal Network, Environmental Regulation, and Plant Death (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:101:y:2020:i:c:s0095069620300425

DOI: 10.1016/j.jeem.2020.102319

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