Selective Accountability: Information-Based Regulations and Environmental Disparities

Abstract

Information-based regulations are often designed to benefit the public at large. However, there is significant heterogeneity in communities’ capacity to process and act on information. This paper studies how such heterogeneity shapes firms' environmental outcomes under the Toxic Release Inventory (TRI) Program in the U.S. Specifically, we examine whether and how firms adjust their polluting decisions in response to two plausibly exogenous shocks to the TRI program: changes in the public’s interpretation of the toxicity of disclosed chemicals and increased access to new pollution information. We document systematic disparities in intra-firm pollution allocation following these information changes. Although pollution has been disproportionately concentrated in lower-status communities, firms only implement quality abatement and reduce pollution in higher-status areas. Additional analyses suggest that these uneven corporate responses vary systematically with media coverage and civic engagement across communities. Overall, we highlight a hidden outcome of information-based environmental regulations: by enabling selective responses, corporate environmental information may exacerbate existing disparities in the distribution of economic resources and environmental risks in society.

Keywords: Information-Based Regulation, Distributional Impact, Carcinogens, Pollution Abatement, Environmental Disparities

JEL Classification: I18, K32, M40, M48, P45, Q52, Q53