Economic Geography and Air Pollution Regulation in the United States

Alex Hollingsworth, Carl Kitchens, Taylor Jaworski and Ivan Rudik

Journal of Political Economy Microeconomics, 2026, vol. 4, issue 1, 38 - 77

Abstract: We develop a quantitative economic geography model with endogenous emissions, amenities, trade, and labor reallocation to evaluate the spatial impact of the leading air quality regulation in the United States: the National Ambient Air Quality Standards (NAAQS). We find that the NAAQS generate $40 billion in annual welfare gains, first-best emissions pricing would increase this by an additional $70 billion, gains are concentrated in a small set of cities, and improved amenities attract nonmanufacturing workers. Atmospheric transport of emissions, labor reallocation, and trade are first-order factors for quantifying the level and distribution of both costs and benefits of the NAAQS.

Date: 2026
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