Firm Presence, Pollution, and Agglomeration: Evidence from a Randomized Environmental Place-Based Policy

Michael Gechter and Namrata Kala

No 21060, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Firm location decisions have externalities on other firms due to competitive or agglomerative forces, and on the environment. We study an environmental place-based policy that randomly moved 20,000 firms in New Delhi. Relocation reduces pollution, but firm exit increases. We combine the exogenous assignment of firms to industrial plots with a model to estimate spillovers on neighboring firms, showing that firm survival rates could have been increased by allocating firms to plots accounting for input-output linkages. These results provide causal evidence on how firm presence impacts environmental quality, and how spillovers can be used to minimize costs on regulated firms.

JEL-codes: D22 L25 L51 O12 O13 Q52 Q53 Q56 R11 R38 (search for similar items in EconPapers)
Date: 2026-01
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