The Effect of Competition on Toxic Pollution Releases

• Environmental and Resource Economics Workshop

Date and Location

Wednesday, March 4, 2015, 12:10 PM - 1:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

We examine how competition affects toxic industrial releases, using five years of data from thousands of facilities across hundreds of industries. Our main result indicates that competition reduces toxic releases. On average, each percentage-point reduction in the Herfindahl Index (HHI) results in a two-percent reduction in a facility’s toxic releases, and the effect is larger in more concentrated industries. In addition, we find that competition reduces releases of carcinogenic chemicals, a category of pollutants that pose a particularly acute public health concern. Our results also shed some light on the mechanisms through which firms reduce pollution releases. We find that facilities in more competitive industries engage in more pollution reduction activities. At the same time, we find some evidence that is consistent with facilities in more competitive industries reducing pollution by reducing output. Taken together, our results fail to provide support for the hypothesis that competition leads to more socially undesirable behavior.