Regional and Aggregate Economic Consequences of Environmental Policy

Authors

Tom Schmitz, University of London - Queen Mary and Westfield CollegeFollow
Italo Colantone, Bocconi University, Baffi-Carefin Research Center and CESifoFollow
Gianmarco I.P. Ottaviano, Bocconi University, FEEM and CEPRFollow

Date of This Version

6-18-2024

Abstract

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.

Recommended Citation

Schmitz, Tom; Colantone, Italo; and Ottaviano, Gianmarco I.P., "Regional and Aggregate Economic Consequences of Environmental Policy" (June 18, 2024). Fondazione Eni Enrico Mattei Working Papers. Paper 1437.
https://services.bepress.com/feem/paper1437