The Role of Demographic and Cost-Related Factors in Determining Where Plants Locate – A Tale of Two Texas Cities

In the environmental justice literature, evidence of disproportionate siting in poor or minority neighborhoods is decidedly mixed. Some allege this is due to the difference in whether the study looks at evidence at the national, state, or city level. Here, I compare results from two of the largest cities in Texas to results for the state overall to discern whether important demographic or other differences are evident at the city level that may be masked at a more aggregate level of analysis. I examine four possible hypotheses for why plants may locate in poor or minority neighborhoods: profit maximization (or cost minimization); relatively low willingness-to-pay for environmental amenities; a lower propensity for collective action by the community; and finally, the desire on the part of the firm to discriminate against particular groups of people. Specifically, I match the location of manufacturing plants that reported to the Toxic Release Inventory to US Census information at the census tract level at the time when the siting decision occurred. I then combine this information with a variety of other data, including voter participation, wages, and crime rates at the county-level. The main findings of this paper is that the principle driver of plant location decisions is profit maximization and that variables associated with the collective action and discrimination hypotheses are largely not significant, population density excepted. These findings appear to hold both at the city and state level. Variables associated with willingness-to-pay for environmental amenities appear somewhat sensitive to geographic scope: poverty is sometimes significant at the state level but never significant at the level of the city.