JobsversustheEnvironment-CryWolfProject.PDFVIP

Jobs versus the Environment: An Industry-level Perspective Richard D. Morgenstern, William A. Pizer, and Jhih-Shyang Shih December 1998, Revised November 1999, Revised June 2000 • Discussion Paper 99–01–REV Resources for the Future 1616 P Street, NW Washington, D.C. 20036 Telephone: 202–328–5000 Fax: 202–939–3460 Internet: © 2000 Resources for the Future. All rights reserved. No portion of this paper may be reproduced without permission of the authors. Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review or editorial treatment. Jobs versus the Environment: An Industry-level Perspective Richard D. Morgenstern, William A. Pizer, and Jhih-Shyang Shih Abstract The possibility that workers could be adversely affected by environmental policies imposed on heavily regulated industries has led to claims of a “jobs versus the environment” trade-off by both business and labor leaders. The present research examines this claim at the industry level for four heavily polluting industries: pulp and paper mills, plastic manufacturers, petroleum refiners, and iron and steel mills. By focusing on labor effects across an entire industry, we construct a measure relevant to the concerns of key stakeholders, such as labor unions and trade groups. We decompose the link between environmental regulation and employment into three distinct components: factor shifts to more or less labor intensity, changes in total expenditures, and changes in the quantity of output demanded. We use detailed plant-level data to estimate the key parameters describing factor shifts and changes in total expenditures. We then use aggregate time-series data on industry supply shocks and output responses to estimate the demand effect. We find that increased environmental spending generally does not cause a