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Transboundary Spillovers and Decentralization of Environmental Policies

27 Pages Posted: 16 Sep 2004 Last revised: 15 Nov 2013

Hilary Sigman

Rutgers University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2004


Most US federal environmental policies allow states to assume responsibility for implementation and enforcement of regulations; states with this responsibility are referred to as "authorized'' or having "primacy.'' Although such decentralization may have benefits, it may also have costs with pollution spillovers across states. This paper estimates these costs empirically by studying the free riding of states authorized under the Clean Water Act. The analysis examines water quality in rivers around the US and includes fixed effects for the location where water quality is monitored to address unobserved geographic heterogeneity. The estimated equations suggest that free riding gives rise to a 4% degradation of water quality downstream of authorized states, with an environmental cost downstream of $17 million annually.

Suggested Citation

Sigman, Hilary, Transboundary Spillovers and Decentralization of Environmental Policies (August 2004). NBER Working Paper No. w10717. Available at SSRN:

Hilary A. Sigman (Contact Author)

Rutgers University - Department of Economics ( email )

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New Brunswick, NJ 08901
United States


National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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