The Transitional Costs of Sectoral Reallocation: Evidence from the Clean Air Act and the Workforce
January 2012
Working Paper Number:
CES-12-02
Abstract
New environmental regulations lead to a rearrangement of production away from polluting industries, and workers in those industries are adversely affected. This paper uses linked worker-firm data in the United States to estimate the transitional costs associated with reallocating workers from newly regulated industries to other sectors of the economy. The focus on workers rather than industries as the unit of analysis allows me to examine previously unobserved economic outcomes such as non-employment and long run earnings losses from job transitions, both of which are critical to understanding the reallocative costs associated with these policies. Using panel variation induced by the 1990 Clean Air Act Amendments (CAAA), I find that the reallocative costs of environmental policy are significant. Workers in newly regulated plants experienced, in aggregate, more than $9 billion inforegone earnings for the years after the change in policy. Most of these costs are driven by non-employment and lower earnings in future employment, while earnings of workers who remain with their firm change little. Relative to the estimated benefits of the 1990 CAAA, these one-time transitional costs are small. However, the estimated costs far exceed the workforce compensation policies designed to mitigate some of these earnings losses.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
econometric,
payroll,
quarterly,
cost,
restructuring,
employed,
accounting,
recession,
employment estimates,
expenditure,
regulation,
regulatory,
unobserved,
spillover,
econometrician,
emission,
pollution,
epa,
abatement expenditures,
polluting,
employment measures,
compensation,
trends employment,
employment trends,
employment recession
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Census of Manufactures,
Standard Statistical Establishment List,
Standard Industrial Classification,
Yale University,
National Science Foundation,
New York Times,
Longitudinal Business Database,
Environmental Protection Agency,
North American Free Trade Agreement,
Department of Labor,
National Ambient Air Quality Standards,
Alfred P Sloan Foundation,
Longitudinal Employer Household Dynamics,
United States Census Bureau,
Social Security Disability Insurance,
Labor Turnover Survey
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'The Transitional Costs of Sectoral Reallocation: Evidence from the Clean Air Act and the Workforce' are listed below in order of similarity.
-
Working PaperEvery Breath You Take, Every Dollar You'll Make: The Long-Term Consequences of the Clean Air Act of 1970🔥
September 2013
Working Paper Number:
CES-13-52
This paper examines the long-term impacts of in-utero and early childhood exposure to ambient air pollution on adult labor market outcomes. We take advantage of a new administrative data set that is uniquely suited for addressing this question because it combines information on individuals' quarterly earnings together with their counties and dates of birth. We use the sharp changes in ambient air pollution concentrations driven by the implementation of the 1970 Clean Air Act Amendments as a source of identifying variation, and we compare cohorts born in counties that experienced large changes in total suspended particulate (TSP) exposure to cohorts born in counties that had minimal or no changes. We nd a signi cant relationship between TSP exposure in the year of birth and adult labor market outcomes. A 10 unit decrease in TSP in the year of birth is associated with a 1 percent increase in annual earnings for workers aged 29-31. Most, but not all, of this effect is driven by an increase in labor force participation. In present value, the gains from being born into a county affected by the 1970 Clean Air Act amount to about $4,300 in lifetime income for the 1.5 million individuals born into these counties each year.View Full Paper PDF
-
Working PaperMeasuring The Impact Of The Toxics Release Inventory: Evidence From Manufacturing Plant Births
March 2013
Working Paper Number:
CES-13-07
The Toxics Release Inventory was the first major initiative to take a disclosurebased approach to environmental regulation and has served as the model for several other disclosure-based environmental policies. Yet the magnitude of its direct impacts on industrial manufacturing outcomes has not been established. I use Census Bureau micro-data to estimate the impacts of the Toxics Release Inventory on the opening of new manufacturing plants. I find that on average, counties that were found to be among the dirtiest in the country, in terms of toxic emissions, experienced a decrease in 'dirty' plant births and an even larger increase in 'clean' plant births. Furthermore, the magnitude of this shift is closely related to per capita income in the affected coun- ties - the effect is strongest in high-income communities and is reversed in low-income communities. I discuss the implications for information-based environmental policies.View Full Paper PDF
-
Working PaperWhat Caused Racial Disparities in Particulate Exposure to Fall? New Evidence from the Clean Air Act and Satellite-Based Measures of Air Quality
January 2020
Working Paper Number:
CES-20-02
Racial differences in exposure to ambient air pollution have declined significantly in the United States over the past 20 years. This project links restricted-access Census Bureau microdata to newly available, spatially continuous high resolution measures of ambient particulate pollution (PM2.5) to examine the underlying causes and consequences of differences in black-white pollution exposures. We begin by decomposing differences in pollution exposure into components explained by observable population characteristics (e.g., income) versus those that remain unexplained. We then use quantile regression methods to show that a significant portion of the 'unexplained' convergence in black-white pollution exposure can be attributed to differential impacts of the Clean Air Act (CAA) in non-Hispanic African American and non-Hispanic white communities. Areas with larger black populations saw greater CAA-related declines in PM2.5 exposure. We show that the CAA has been the single largest contributor to racial convergence in PM2.5 pollution exposure in the U.S. since 2000 accounting for over 60 percent of the reduction.View Full Paper PDF
-
Working PaperPayroll Tax Incidence: Evidence from Unemployment Insurance
June 2024
Working Paper Number:
CES-24-35
Economic models assume that payroll tax burdens fall fully on workers, but where does tax incidence fall when taxes are firm-specific and time-varying? Unemployment insurance in the United States has the key feature of varying both across employers and over time, creating the potential for labor demand responses if tax costs cannot be fully passed through to worker wages. Using state policy changes and administrative data of matched employer-employee job spells, I study how employment and earnings respond to unexpected payroll tax increases for highly exposed employers. I find significant drops in employment growth driven by lower hiring, and minimal evidence of passthrough to earnings. The negative employment effects are strongest for young workers and single-establishment firms.View Full Paper PDF
-
Working PaperThe Grandkids Aren't Alright: The Intergenerational Effects of Prenatal Pollution Exposure
November 2020
Working Paper Number:
CES-20-36
Evidence shows that environmental quality shapes human capital at birth with long-run effects on health and welfare. Do these effects, in turn, affect the economic opportunities of future generations? Using newly linked survey and administrative data, providing more than 150 million parent/child links, we show that regulation-induced improvements in air quality that an individual experienced in the womb increase the likelihood that their children, the second generation, attend college 40-50 years later. Intergenerational transmission appears to arise from greater parental resources and investments, rather than heritable, biological channels. Our findings suggest that within-generation estimates of marginal damages substantially underestimate the total welfare effects of improving environmental quality and point to the empirical relevance of environmental quality as a contributor to economic opportunity in the United States.View Full Paper PDF
-
Working PaperWage Dispersion, Compensation Policy and the Role of Firms
November 2005
Working Paper Number:
tp-2005-04
Empirical work in economics stresses the importance of unobserved firm- and person-level characteristics in the determination of wages, finding that these unobserved components account for the overwhelming majority of variation in wages. However, little is known about the mechanisms sustaining these wage di'er- entials. This paper attempts to demystify the firm-side of the puzzle by developing a statistical model that enriches the role that firms play in wage determination, allowing firms to influence both average wages as well as the returns to observable worker characteristics. I exploit the hierarchical nature of a unique employer-employee linked dataset for the United States, estimating a multilevel statistical model of earnings that accounts for firm-specific deviations in average wages as well as the returns to components of human capital - race, gender, education, and experience - while also controlling for person-level heterogeneity in earnings. These idiosyncratic prices reflect one aspect of firm compensation policy; another, and more novel aspect, is the unstructured characterization of the covariance of these prices across firms. I estimate the model's variance parameters using Restricted (or Residual) Maximum Likelihood tech- niques. Results suggest that there is significant variation in the returns to worker characteristics across firms. First, estimates of the parameters of the covariance matrix of firm-specific returns are statistically significant. Firms that tend to pay higher average wages also tend to pay higher than average returns to worker characteristics; firms that tend to reward highly the human capital of men also highly reward the human capital of women. For instance, the correlation between the firm-specific returns to education for men and women is 0.57. Second, the firm-specific returns account for roughly 9% of the variation in wages - approximately 50% of the variation in wages explained by firm-specific intercepts alone. The inclusion of firm-specific returns ties variation in wages, otherwise attributable to firm-specific intercepts, to observable components of human capital.View Full Paper PDF
-
Working PaperAgent Heterogeneity and Learning: An Application to Labor Markets
October 2002
Working Paper Number:
tp-2002-20
I develop a matching model with heterogeneous workers, rms, and worker-firm matches, and apply it to longitudinal linked data on employers and employees. Workers vary in their marginal product when employed and their value of leisure when unemployed. Firms vary in their marginal product and cost of maintaining a vacancy. The marginal product of a worker-firm match also depends on a match-specific interaction between worker and rm that I call match quality. Agents have complete information about worker and rm heterogeneity, and symmetric but incomplete information about match quality. They learn its value slowly by observing production outcomes. There are two key results. First, under a Nash bargain, the equilibrium wage is linear in a person-specific component, a firm-specific component, and the posterior mean of beliefs about match quality. Second, in each period the separation decision depends only on the posterior mean of beliefs and person and rm characteristics. These results have several implications for an empirical model of earnings with person and rm e ects. The rst implies that residuals within a worker-firm match are a martingale; the second implies the distribution of earnings is truncated. I test predictions from the matching model using data from the Longitudinal Employer-Household Dynamics (LEHD) Program at the US Census Bureau. I present both xed and mixed model specifications of the equilibrium wage function, taking account of structural aspects implied by the learning process. In the most general specification, earnings residuals have a completely unstructured covariance within a worker-firm match. I estimate and test a variety of more parsimonious error structures, including the martingale structure implied by the learning process. I nd considerable support for the matching model in these data.View Full Paper PDF
-
Working PaperDid Timing Matter? Life Cycle Differences in Effects of Exposure to the Great Recession
September 2019
Working Paper Number:
CES-19-25
Exposure to a recession can have persistent, negative consequences, but does the severity of those consequences depend on when in the life cycle a person is exposed? I estimate the effects of exposure to the Great Recession on employment and earnings outcomes for groups defined by year of birth over the ten years following the beginning of the recession. With the exception of the oldest workers, all groups experience reductions in earnings and employment due to local unemployment rate shocks during the recession. Younger workers experience the largest earnings losses in percent terms (up to 13 percent), in part because recession exposure makes them persistently less likely to work for high-paying employers even as their overall employment recovers more quickly than older workers'. Younger workers also experience reductions in earnings and employment due to changes in local labor market structure associated with the recession. These effects are substantially smaller in magnitude but more persistent than the effects of unemployment rate increases.View Full Paper PDF
-
Working PaperTrade Liberalization and Labor-Market Outcomes: Evidence from US Matched Employer-Employee Data
September 2022
Working Paper Number:
CES-22-42
We use matched employer-employee data to examine outcomes among workers initially employed within and outside manufacturing after trade liberalization with China. We find that exposure to this shock operates predominantly through workers' counties (versus industries), that larger own industry and downstream exposure typically reduce relative earnings, and that greater upstream exposure often raises them. The latter is particularly important outside manufacturing: while we find substantial and persistent predicted declines in relative earnings among manufacturing workers, those outside manufacturing are generally predicted to experience relative earnings gains. Investigation of employment reactions indicates they account for a small share of the earnings effect.View Full Paper PDF
-
Working PaperDo Employment Protections Reduce Productivity? Evidence from U.S. States
March 2007
Working Paper Number:
CES-07-04
Theory predicts that mandated employment protections may reduce productivity by distorting production choices. Firms facing (non-Coasean) worker dismissal costs will curtail hiring below efficient levels and retain unproductive workers, both of which should affect productivity. These theoretical predictions have rarely been tested. We use the adoption of wrongful discharge protections by U.S. state courts over the last three decades to evaluate the link between dismissal costs and productivity. Drawing on establishment-level data from the Annual Survey of Manufacturers and the Longitudinal Business Database, our estimates suggest that wrongful discharge protections reduce employment flows and firm entry rates. Moreover, analysis of plant-level data provides evidence of capital deepening and a decline in total factor productivity following the introduction of wrongful discharge protections. This last result is potentially quite important, suggesting that mandated employment protections reduce productive efficiency as theory would suggest. However, our analysis also presents some puzzles including, most significantly, evidence of strong employment growth following adoption of dismissal protections. In light of these puzzles, we read our findings as suggestive but tentative.View Full Paper PDF
