Municipal and Economic Consequences of PFAS Contamination Discovery
74 Pages Posted: 20 Apr 2021 Last revised: 16 Mar 2025
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: Suggested Citation