The Effect of Competition on Toxic Pollution Releases

30 Pages Posted: 20 Jun 2014 Last revised: 12 Dec 2015

See all articles by Daniel H. Simon

Daniel H. Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Jeffrey Prince

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Date Written: December 1, 2015

Abstract

We examine how competition affects toxic industrial releases, using five years of data from thousands of facilities across hundreds of industries. Our main result indicates that competition reduces toxic releases at the facility level. On average, each percentage-point reduction in the Herfindahl Index (HHI) results in a nearly two-percent reduction in a facility’s toxic releases. At the same time, we find no evidence that competition increases aggregate pollution. Further analysis sheds some light on the mechanisms through which firms reduce pollution releases due to increased competition. In particular, we find suggestive evidence that this relationship is due to both reduced output and increases in abatement. We find no evidence that our result is driven by: consumer aversion to pollution, regulations changing with competition, or technologies introduced by new firms. Taken together, our results indicate that competition may be good, at least for public health in areas near polluting facilities, and fail to provide support for the hypothesis that competition leads to more socially undesirable behavior.

Keywords: Competition, Pollution, Toxic Releases Inventory

JEL Classification: M14, Q25

Suggested Citation

Simon, Daniel H. and Prince, Jeffrey, The Effect of Competition on Toxic Pollution Releases (December 1, 2015). Indiana University, Bloomington School of Public & Environmental Affairs Research Paper No. 2456732, Available at SSRN: https://ssrn.com/abstract=2456732 or http://dx.doi.org/10.2139/ssrn.2456732

Daniel H. Simon (Contact Author)

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Jeffrey Prince

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
112
Abstract Views
1,177
rank
269,717
PlumX Metrics