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Contact: Justin Harmon (609) 258-5732

Date: February 23, 1999

Graduate Research Finds Pollution Control Affects Jobs, Housing Values

PRINCETON, N.J. -- More stringent air pollution control standards may cost jobs in some areas, but they also contribute to higher housing values, according to a study by a researcher at Princeton.

Determining the monetary costs and benefits of environmental regulations has long posed a puzzle for economists and environmental policymakers. Michael Greenstone, who received his doctorate in economics from Princeton University last November, assembled a few pieces of the puzzle in his doctoral dissertation. "I tried to measure some of the costs and benefits of the Clean Air Act Amendments of 1970 and 1977," Greenstone said.

Greenstone's study first explored how the Clean Air Act has influenced the location and expansion of polluting industries in the United States, and then examined the relationship between improving air quality and housing prices.

"The dissertation applies the research style that I learned at Princeton," Greenstone said. "The applied economists there are known for obtaining credible answers to difficult questions through the application of cutting-edge statistical techniques to unique data sources." Greenstone's dissertation advisors were Professor David Card, who recently moved from Princeton to the University of California, Berkeley, Professor Orley Ashenfelter, and Professor Henry Farber. Greenstone has submitted the work for publication.

Greenstone examined 20 years of data across the entire United States to determine the consequences of environmental regulations on polluting industries. The 1970 and 1977 Clean Air Act Amendments require varying degrees of pollution controls by industries, such as steel producers, depending upon location. Industry located in counties where air quality has "attained" federal standards have fewer pollution control obligations than "non-attainment" counties where the air is below standards.

By correlating how counties were classified under the Clean Air Act with data on manufacturing activity, Greenstone concluded that between 1972 and 1987, counties where air pollution regulations were more stringent lost 100,000 manufacturing jobs, $50 billion in capital stock and $30 billion in output in polluting industries. Greenstone believes some of the lost jobs and industrial output moved to counties with less stringent air pollution regulations but said it is not possible from the available data to be certain. Some of the industries probably relocated outside the United States, he said.

While tough pollution regulations made business difficult for some industries, residents apparently appreciated the environmental improvements. Greenstone and his co-author, Kenneth Chay, who took his doctorate at Princeton and is now on campus as a visiting professor, found that these same regulations caused air pollution to decline and housing prices to rise. "We think both relationships are causal," Greenstone said. "Since it is impossible to go to a store and purchase clean air, it is difficult to place an economic value on it. This analysis, which relies on housing prices to infer the value of clean air, indicates that people are willing to pay for improvements in the quality of air they breathe."

Greenstone currently is a Robert Wood Johnson Postdoctoral Scholar in Health Policy at the University of California, Berkeley. His current research examines the links between air pollution and childhood mortality.