Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences

67 Pages Posted: 27 Sep 2016

See all articles by Joseph S. Shapiro

Joseph S. Shapiro

University of California, Berkeley; National Bureau of Economic Research (NBER)

Reed Walker

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

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Date Written: September 26, 2016

Abstract

Between 1990 and 2008, air pollution emissions from U.S. manufacturing fell by 60 percent despite a substantial increase in manufacturing output. We show that these emissions reductions are primarily driven by within-product changes in emissions intensity rather than changes in output or in the composition of products produced. We then develop and estimate a quantitative model linking trade with the environment to better understand the economic forces driving these changes. Our estimates suggest that the implicit pollution tax that manufacturers face doubled between 1990 and 2008. These changes in environmental regulation, rather than changes in productivity and trade, account for most of the emissions reductions.

Keywords: Cap-and-trade, Market-based instruments, NOx Budget Program, Pollution, Productivity, Trade

JEL Classification: F18, F64, H23, Q56

Suggested Citation

Shapiro, Joseph S. and Walker, Reed, Why is Pollution from U.S. Manufacturing Declining? The Roles of Trade, Regulation, Productivity, and Preferences (September 26, 2016). Cowles Foundation Discussion Paper No. 1982R, Available at SSRN: https://ssrn.com/abstract=2843870 or http://dx.doi.org/10.2139/ssrn.2843870

Joseph S. Shapiro (Contact Author)

University of California, Berkeley ( email )

HOME PAGE: http://joseph-s-shapiro.com

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Reed Walker

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building
Berkeley, CA 94720
United States

HOME PAGE: http://faculty.haas.berkeley.edu/rwalker/

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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