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Regional and Aggregate Economic Consequences of Environmental Policy

Author

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  • Schmitz, Tom
  • Colantone, Italo
  • Ottaviano, Gianmarco

Abstract

This paper shows how to combine microeconometric evidence on the effects of environmental policy with a macroeconomic model, accounting for general equilibrium spillovers that have mostly been ignored in the literature. To this end, we study the effects of a recent US air pollution policy. We use regression evidence on the policy’s impact across industries and local labor markets to calibrate a quantitative spatial model allowing for general equilibrium spillovers. Our model implies that the policy lowered emissions by 11.1%, but destroyed approximately 250’000 jobs. Ignoring spillovers overestimates job losses in polluting industries, but underestimates job losses in clean industries.

Suggested Citation

  • Schmitz, Tom & Colantone, Italo & Ottaviano, Gianmarco, 2024. "Regional and Aggregate Economic Consequences of Environmental Policy," FEEM Working Papers 343507, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemwp:343507
    DOI: 10.22004/ag.econ.343507
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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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