Federal Environmental Regulation Impacts on Local Economic Growth and Stability

Federal environmental regulations under the Clean Air Act affect employment as local economies respond to a changing regulatory environment. We analyze the net employment growth and employment stability effects of Clean Air Act regulations, characterizing responses in these key indicators of local economic development. Using nationwide longitudinal county data from 1980 through 2005, we find that enhanced employment stability is associated with nonattainment areas for total suspended particulates (TSP) and 1-hour ozone; negative employment growth is found in TSP and carbon monoxide nonattainment areas, whereas positive employment growth for counties is found in 1-hour ozone and sulfur dioxide nonattainment areas. Also, regulatory effects persist after attainment status has been regained for TSP and transitory persistence is seen after regaining attainment status for 1-hour ozone.