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Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions

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dc.contributor.author Deschênes, Olivier
dc.contributor.author Greenstone, Michael
dc.contributor.author Shapiro, Joseph S.
dc.date.accessioned 2012-09-11T22:35:43Z
dc.date.available 2012-09-11T22:35:43Z
dc.date.issued 2012-07-15
dc.identifier.uri http://hdl.handle.net/1721.1/72655
dc.description.abstract The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters. Carbon monoxide regulations, on the other hand, appear to increase measured TFP, especially among refineries. The application of corrections for the confounding of price increases and output declines and sample selection on survival produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, which is about 8.8 percent of manufacturing sector profits in this period. en_US
dc.publisher Cambridge, MA: Department of Economics, Massachusetts Institute of Technology en_US
dc.relation.ispartofseries Working paper, Massachusetts Institute of Technology, Dept. of Economics;12-18
dc.rights An error occurred on the license name. en
dc.rights.uri An error occurred getting the license - uri. en
dc.subject willingness to pay for air quality en_US
dc.subject cap and trade en_US
dc.subject ozone en_US
dc.subject pharmaceuticals en_US
dc.subject mortality en_US
dc.subject compensatory behavior en_US
dc.subject human health en_US
dc.title Defensive Investments and the Demand for Air Quality: Evidence from the NOx Budget Program and Ozone Reductions en_US
dc.type Working Paper en_US


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