Charles and Joan Haworth Professor of Economics Carl Kitchens, Ph.D., co-authored “Economic Geography and Air Pollution Regulation in the United States.” This article is forthcoming in the Journal of Political Economy: Microeconomics alongside Dr. Kitchens’ co-authors, Alex Hollingsworth, Ph.D., (Ohio State University), Taylor Jaworski, Ph.D., (Colorado University – Boulder), and Ivan Rudik, Ph.D., (Cornell). The following summary was written by Jyana O’Donnell (B.A. English ’25).
Florida State University’s Charles and Joan Haworth Professor of Economics Carl Kitchens, Ph.D., co-authored “Economic Geography and Air Pollution Regulation in the United States,” forthcoming in the Journal of Political Economy: Microeconomics. The paper examines how the National Ambient Air Quality Standards (NAAQS) affect the economy and environment in different U.S. regions and considers alternate policy designs to see if benefits could be improved.
Dr. Kitchens and his co-authors discovered that the existing NAAQS generate substantial benefits, including an estimated $40 billion in welfare gains annually. Additionally, the authors found that implementing an emissions pricing system could yield an additional $70 billion in gains annually.
In the United States, the Clean Air Act (CAA), originally enacted in 1963, is the primary air quality regulation. If a county does not meet the regulated air quality standards, known as being in “nonattainment,” manufacturing plants in the county must invest in technology to lessen their impact.
The authors of this paper develop a quantitative economic geography model that accounts for endogenous emissions, amenities, trade, and labor reallocation to evaluate spatial impacts of the NAAQS. Their innovative model accounts for costly trade of goods, imperfectly mobile labor, and non-uniform spread of local air pollution. This is key to understanding how the effects of regulation can spread beyond the regulated region.
“We find that equilibrium responses and geography captured by our model-based approach are critical for understanding the distribution of welfare impacts,” the authors wrote. “Ignoring these features overestimates costs to workers in regulated industries, misses pecuniary costs imposed on workers in un-regulated sectors, and underestimates spillover benefits to workers in attainment counties.”
Dr. Kitchens and his co-authors used the model to estimate the economic impacts on a county in nonattainment. They found that nonattainment designations led to a 0.66 percent increase in welfare as a result of decreasing air pollution and a 0.08 percent decrease in real wages. Overall, welfare increased by 0.57 percent, equivalent to $40 billion per year.
The authors then use the model to estimate the benefits of increasing the stringency of the NAAQS. They found that increasing the standards’ strictness could improve welfare by billions of dollars annually; further gains are also possible with the implementation of emissions pricing.
“This emphasizes how analyses that do not account for how regulation induces equilibrium reallocation of pollution and workers – potentially into unregulated areas – may misquantify or entirely mis-sign the effects of environmental regulation for subsets of the population,” the authors stated.
To learn more about Dr. Kitchens and his work, click here, or to learn more about the Department of Economics, click here.