Michael Greenstone

This paper estimates the impacts of the Clean Air Act’s division of counties into pollutant-specific nonattainment and attainment categories on measures of industrial activity obtained from 1.75 million Census of Manufactures plant observations. Emitters of the controlled pollutants in nonattainment counties are subject to greater regulatory oversight than emitters in attainment counties. The preferred statistical model for plant-level growth includes plant fixed effects, industry by period fixed effects, and county by period fixed effects. The estimates from this model suggest that in the first 15 years that the Clean Air Act was in force (1972-87), nonattainment counties (relative to attainment ones) lost approximately 590,000 jobs, $37 billion in capital stock, and $75 billion (1987 dollars) of output in pollution-intensive industries. These findings are robust across many specifications, and the effects are apparent across a wide range of polluting industries.

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