Employment Effect of the Clean Air Act
The Clean Air Act (CAA) was implemented in 1970 with the goal of controlling pollution on a national level to protect public health and general welfare. The CAA amendment in 1977 introduced attainment and non-attainment designations based on the level of pollution in individual counties across the country. Revisions in 1990 aimed to reduce threats from acid rain, urban air pollution, toxic air emissions and stratospheric ozone depletion and strengthened enforcement of regulations based on the original act and its previous amendment. While the Clean Air Act has had noticeable success in terms of air quality and human health, the economic implications have remained ambiguous. We assess the impact of the Clean Air Act on employment in the manufacturing sector in counties in New York. While some argue that environmental regulation destroys jobs, others, such as the hypothesis laid out by Michael Porter, argue that environmental regulation can improve a firm’s competitiveness. Using a difference-in-differences model, we find that being a polluter in a non-attainment county increases employment relative to a polluter in an attainment county or a non-polluter in a non-attainment county. These findings indicate that stricter environmental regulation for polluters in non-attainment counties actually increases employment, supporting Porter’s hypothesis that environmental regulation positively influences firms.