Long-Run Environmental Accounting in the US Economy
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This paper estimates an augmented measure of national output inclusive of environmental pollution damage in the United States economy over a 60-year period. The paper reports two primary findings. First, air pollution intensity declined precipitously from the 1950s to the modern era. Air pollution damage comprised roughly 30 percent of output in the post WWII economy, declining to under 10 percent in 2016. Second, accounting for pollution damage significantly affects growth rates. Prior to the passage of the Clean Air Act in 1970, GDP outpaced Environmentally-Adjusted Value Added (EVA), defined as GDP less air pollution damage. Following passage of the Act, EVA grew more rapidly than GDP. Macroeconomic and environmental policies, as well as the business cycle, appreciably affect damages and EVA growth.
Muller thanks helpful comments provided by Billy Pizer, Martin Smith, Jeffrey Vincent, and other participants at the TREE Seminar; Meng et al., and Clay et al., for providing historic air pollution data. All remaining errors are the responsibility of the author. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.