Economics

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

Document Type

Article

Abstract

This article tests the impact of state environmental regulatory stringency on firms’ allocation of production across states using plant-level U.S. Census data for the paper industry during 1967–2012. We model firms’ production shares in each state with a conditional logit specification, testing several measures of state regulatory stringency and controlling for other state characteristics. Firms with relatively low compliance rates are more likely to avoid stringent states compared to firms with the highest compliance rates. This is consistent with our theoretical model when firms’compliance decisions are affected more by differences across their costs, rather than their benefits, of compliance.

Publication Title

Land Economics

Publication Date

2024

Volume

100

Issue

3

First Page

443

Last Page

457

ISSN

0023-7639

DOI

10.3368/le.100.3.071921-0084R

Keywords

environmental regulation, regulatory stringency, compliance rates, compliance costs, production

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