Municipal and Economic Consequences of PFAS Contamination Discovery

74 Pages Posted: 20 Apr 2021 Last revised: 16 Mar 2025

See all articles by Daisy Huang

Daisy Huang

Southwestern University of Finance and Economics (SWUFE)

Amit Kumar

Singapore Management University - Lee Kong Chian School of Business

Date Written: March 1, 2021

Abstract

Hazardous yet previously unmonitored and unregulated, per- and polyfluoroalkyl substances (PFAS) were detected in 2016 in public drinking water systems of 33 US states during the first-ever PFAS testing. A paired-county difference-in-differences design comparing contaminated counties with bordering, same-state uncontaminated counties shows that the contamination discovery raised municipal bond offering yields by 13 basis points. Municipal revenues, taxes, employment, and expenditures declined, while household out-migration increased. Consistent with rising compensating wage differentials, wages in tradable industries rose, but job creation fell, and firm closures increased. Unemployment and self-employment also increased, emphasizing the multifaceted adverse effects of the PFAS contamination discovery.

Keywords: Municipal Bonds, PFAS (Forever Chemicals) Contamination, Drinking Water Contamination

JEL Classification: G14, H72, H74, Q53, Q58.

Suggested Citation

Huang, Daisy and Kumar, Amit, Municipal and Economic Consequences of PFAS Contamination Discovery (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3821639 or http://dx.doi.org/10.2139/ssrn.3821639

Daisy Huang

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Amit Kumar (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://www.amitkmr.com

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