The Clean Air Act and Local Employment Base Sensitivity

Abstract

The Clean Air Act, an important part of U.S. federal environmental regulations, is designed to improve air quality in targeted localities. However, its implementation has unexpected impacts on local industrial structure. The authors identify the effect of nonattainment regulations under the Clean Air Act on the sensitivity of county employment to changes in the national economy, providing guidance for local economic development in counties affected by these regulations. The authors use nationwide, county-level, longitudinal data from 1979 to 2019 and adopt a difference-in-differences approach and implement Coarsened Exact Matching to make the treatment and control groups approximate a fully blocked experiment. The findings indicate that nonattainment for ground-level ozone and sulfur dioxide results in decreased employment sensitivity. This effect is seen immediately for ground-level ozone nonattainment, while it is not seen until 25 years for sulfur dioxide nonattainment. Furthermore, these employment effects persist after attainment status has been regained.