International Review of Environmental and Resource Economics > Vol 4 > Issue 1

Location Decisions of U.S. Polluting Plants: Theory, Empirical Evidence, and Consequences

Ronald Shadbegian, National Center of Environmental Economics, U.S. Environmental Protection Agency, USA, Ann Wolverton, National Center of Environmental Economics, U.S. Environmental Protection Agency, USA, wolverton.ann@epa.gov
 
Suggested Citation
Ronald Shadbegian and Ann Wolverton (2010), "Location Decisions of U.S. Polluting Plants: Theory, Empirical Evidence, and Consequences", International Review of Environmental and Resource Economics: Vol. 4: No. 1, pp 1-49. http://dx.doi.org/10.1561/101.00000029

Published: 22 Jun 2010
© 2010 R. Shadbegian and A. Wolverton
 
Subjects
Environmental Economics
 
Keywords
D21H77Q56Q52
Plant location decisionsEnvironmental policyInter-jurisdictional competitionEnvironmental justice
 

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In this article:
1 Introduction
2 The Theory of Plant Location
3 How do Environmental Regulations Affect Location Decisions for Polluting Plants?
4 Do Governments Compete on the Basis of Environmental Regulation to Attract Polluting Plants?
5 Do Plants Choose to Locate Disproportionately in Poor and Minority Neighborhoods?
6 Conclusion and Suggestions for Further Research
References

Abstract

Economists have long been interested in explaining the spatial distribution of economic activity, focusing on what factors motivate profit-maximizing firms when they choose to open a new plant or expand an existing facility. We begin our paper with a general discussion of the theory of plant location, including the role of taxes and agglomeration economies. However, our paper focuses on the theory, evidence, and implications of the role of environmental regulations in plant location decisions. On its face, environmental regulation would not necessarily be expected to alter location decisions, since we would expect Federal regulation to affect all locations in the United States essentially equally. It turns out, however, that this is not always the case as some geographic areas are subject to greater stringency. Another source of variation is differences across states in the way they implement and enforce compliance with Federal regulation. In light of these spatial differences in the costs of complying with environmental regulations, we discuss three main questions in this survey: Do environmental regulations affect the location decisions of polluting plants? Do states compete for polluting plants through differences in environmental regulation? And, do firms locate polluting plants disproportionately near poor and minority neighborhoods?

DOI:10.1561/101.00000029