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

Format:

Book

Author/Creator:

Gray, Wayne B.

Contributor:

National Bureau of Economic Research.

Shadbegian, Ronald J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8705.

NBER working paper series no. w8705

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

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.

Notes:

Print version record

January 2002.