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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