Paper Number: 2013-03

Document Date: 08/2013

Author(s): Wayne B. Gray, Ronald J. Shadbegian, Chumbei Wang and Merve Cebi

Subject Area(s): Economic Impacts; Air Pollution; Water Pollution

JEL Classification: Environmental Economics: Pollution Control Adoption and Costs; Distributional Effects; Employment Effects; Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling; Government Policy

Keywords: cluster rule; regulatory costs; multimedia regulation; employment effects

Abstract: Many believe that environmental regulation must reduce employment, since regulations are expected to increase production costs, raising prices and reducing demand for output. A careful microeconomic analysis shows that this not guaranteed. Even if environmental regulation reduces output in the regulated industry, abating pollution could require additional labor (e.g. to monitor the abatement capital and meet EPA reporting requirements). Pollution abatement technologies could also be labor enhancing. In this paper we analyze how a particular EPA regulation, the “Cluster Rule” (CR) imposed on the pulp and paper industry in 2001, affected employment in that sector. Using establishment level data from the Census of Manufacturers and Annual Survey of Manufacturers at the U.S. Census Bureau from 1992-2007 we find evidence of small employment declines (on the order of 3%-7%), sometimes statistically significant, at a subset of the plants covered by the CR.

This paper is part of the Environmental Economics Working Paper Series.

• Do EPA Regulations Affect Labor Demand? Evidence from the Pulp and Paper Industry (PDF)(42 pp, 795 K, 08/2013)