When Do Firms Shift Production Across States to Avoid Environmental Regulation?

Wayne Gray and Ron Shadbegian

No 8705, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper takes a new approach to testing the impact of state environmental regulatory stringency on firms' location decisions, focusing on firms' allocation of production across states. We use Census data for the paper industry to measure the share of each firm's production in each state during 1967-2002. We use a conditional logit model, controlling for a variety of state characteristics that influence firm costs and revenues, and testing several measures of state environmental stringency. Firms allocate significantly smaller production shares to states with stricter regulations, but there is significant heterogeneity across firms in their sensitivity to regulatory stringency. Firms with low compliance rates are more sensitive than firms with high compliance rates, consistent with a model where compliance rates are driven by differences across firms in the costs of compliance, rather than in the benefits of compliance.

JEL-codes: D2 Q2 (search for similar items in EconPapers)
Date: 2002-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-mic
Note: PE EEE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Wayne B. Gray & Ron Shadbegian, 2024. "When Do Firms Shift Production across States to Avoid Environmental Regulation?," Land Economics, vol 100(3), pages 443-457.

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Journal Article: When Do Firms Shift Production across States to Avoid Environmental Regulation? (2024)
Working Paper: When Do Firms Shift Production Across State to Avoid Environmental Regulation? (2002)
Working Paper: When Do Firms Shift Production Across States to Avoid Environmental Regulation? (2001)
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