NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Transboundary Spillovers and Decentralization of Environmental Policies

Hilary Sigman

NBER Working Paper No. 10717
Issued in August 2004
NBER Program(s):   PE   EEE

Most US federal environmental policies allow states to assume responsibility for implementation and enforcement of regulations; states with this responsibility are referred to as "authorized'' or having "primacy.'' Although such decentralization may have benefits, it may also have costs with pollution spillovers across states. This paper estimates these costs empirically by studying the free riding of states authorized under the Clean Water Act. The analysis examines water quality in rivers around the US and includes fixed effects for the location where water quality is monitored to address unobserved geographic heterogeneity. The estimated equations suggest that free riding gives rise to a 4% degradation of water quality downstream of authorized states, with an environmental cost downstream of $17 million annually.

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Document Object Identifier (DOI): 10.3386/w10717

Published: Sigman, Hilary. "Transboundary Spillovers And Decentralization Of Environmental Policies," Journal of Environmental Economics and Management, 2005, v50(1,Jul), 82-101.

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