Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences

Joseph Shapiro and Reed Walker

No 8789, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Between 1990 and 2008, emissions of the most common air pollutants from U.S. manufacturing fell by 60 percent, even as real U.S. manufacturing output grew substantially. This paper develops a quantitative model to explain how changes in trade, environmental regulation, productivity, and consumer preferences have contributed to these reductions in pollution emissions. We estimate the model's key parameters using administrative data on plant-level production and pollution decisions. We then combine these estimates with detailed historical data to provide a model-driven decomposition of the causes of the observed pollution changes. Finally, we compare the model-driven decomposition to a statistical decomposition. The model and data suggest three findings. First, the fall in pollution emissions is due to decreasing pollution per unit output within narrowly defined products, rather than to changes in the types of products produced or changes to the total quantity of manufacturing output. Second, the implicit pollution tax that rationalizes firm production and abatement behavior more than doubled between 1990 and 2008. Third, environmental regulation explains 75 percent or more of the observed reduction in pollution emissions from manufacturing.

Keywords: air quality; environmental regulation; trade and environment (search for similar items in EconPapers)
JEL-codes: F18 F64 H23 Q56 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2015-01
New Economics Papers: this item is included in nep-eff, nep-env and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

Published - published in: American Economic Review, 2018, 108 (12), 3814–3854

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Related works:
Working Paper: Why is Pollution from U.S. Manufacturing Declining" The Roles of Trade, Regulation, Productivity, and Preferences (2016)
Working Paper: Why is Pollution from U.S. Manufacturing Declining" The Roles of Trade, Regulation, Productivity, and Preferences (2015)
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