Regional and Aggregate Economic Consequences of Environmental Policy
18.06.2024
Tom Schmitz (School of Economics and Finance, Queen Mary University of London and CEPR), Italo Colantone (Baffi-Carefin Research Centre, Bocconi University, CESifo and Fondazione Eni Enrico Mattei), Gianmarco Ottaviano (Baffi-Carefin Research Centre, Bocconi University, CEP, CEPR and IGIER)
E24, Q50, Q53
Environmental Policy, Fine Particles, Clean Air Act, Employment, Trade
This paper shows how to combine microeconometric evidence on the effects of environmental policy with a macroeconomic model, accounting for general equilibrium spillovers that have mostly been ignored in the literature. To this end, we study the effects of a recent US air pollution policy. We use regression evidence on the policy’s impact across industries and local labor markets to calibrate a quantitative spatial model allowing for general equilibrium spillovers. Our model implies that the policy lowered emissions by 11.1%, but destroyed approximately 250’000 jobs. Ignoring spillovers overestimates job losses in polluting industries, but underestimates job losses in clean industries.
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Suggested Citation: T. Schmitz, I. Colantone, G. Ottaviano, ‘Regional and Aggregate Economic Consequences of Environmental Policy’, Nota di Lavoro 10.2024, Milano, Italia: Fondazione Eni Enrico Mattei.