The Effects of Environmental Regulation on Business Location in the United States

TLDR

The study empirically examines whether variations in state environmental regulations affect the location of manufacturing branch plants by Fortune 500 companies. The study finds no statistically significant effects of state environmental regulations on the location of Fortune 500 manufacturing plants, and while precise estimates rule out large effects for most industries, the uncertainty for highly polluting sectors leaves open the possibility of policy‑relevant impacts.

Abstract

ABSTRACT This article empirically examines whether variations in state environmental regulations have affected the location of manufacturing branch plants by the Fortune 500 companies. Using several measures of environmental regulation, no statistically significant effects of environmental regulation on business location are found. For most manufacturing industries, the estimates are precise enough to rule out the possibility of large effects of environmental regulation on business location. For highly polluting industries, however, the variance in the estimates is quite large. We cannot rule out the possibility of effects of environmental regulation on the location of highly polluting industries that are large enough to be important to policymakers.