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An Industry-Adjusted Index of State Environmental Compliance Costs

An Industry-Adjusted Index of State Environmental Compliance Costs

Chapter:
(p.131) 4 An Industry-Adjusted Index of State Environmental Compliance Costs
Source:
Behavioral and Distributional Effects of Environmental Policy
Author(s):
Arik Levinson
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226094809.003.0005

This chapter describes an industry-adjusted index of state environmental compliance costs that can be used to compare regulations both across states in a given year and within states over time. It compares that index to others used in the environmental economics literature and uses it to answer several often-raised questions about the pattern of environmental regulations in the United States and how that pattern has changed over time. In addition, the chapter describes an application of the index, as used to assess the effect of environmental regulatory stringency on foreign direct investment to U.S. states. The index shows that industry composition plays an important role in determining spending on environmental compliance costs for different states. Rank orderings of states by pollution abatement spending look very different once their industrial compositions have been controlled for. Differences among states are exaggerated by differences in their industrial compositions.

Keywords:   industry-adjusted index, compliance costs, environmental compliance, environmental regulations, United States, foreign direct investment, industrial compositions, pollution abatement

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