Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator

John List, Daniel Millimet, Per Fredriksson and W. Warren McHone
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W. Warren McHone: University of Central Florida

The Review of Economics and Statistics, 2003, vol. 85, issue 4, 944-952

Abstract: This study examines the effects of air quality regulation on economic activity. Anecdotal evidence and some recent empirical studies suggest that an inverse relationship exists between the stringency of environmental regulations and new plant formations. Using a unique county-level data set for New York State from 1980 to 1990, we revisit this conjecture using a seminonparametric method based on propensity score matching. Our empirical estimates suggest that pollution-intensive plants are responding to environmental regulations; more importantly, we find that traditional parametric methods used in previous studies may dramatically understate the impact of more stringent regulations. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2003
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