When Do Firms Shift Production Across States to Avoid Environmental Regulation? / Wayne B. Gray, Ronald J. Shadbegian.

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Gray, Wayne B

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w8705.Publication details: Cambridge, Mass. National Bureau of Economic Research 2002.Description: 1 online resource: illustrations (black and white)Subject(s):

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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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w8705 (Browse shelf(Opens below))	Not For Loan

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January 2002.

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.