Pollution Abatement and Environmental Equity: A Dynamic Study

Abstract

We study pollution abatement and environmental equity in a dynamic panel model using data for 236 plants in the US pulp and paper industry observed over the period 1985-1997. We suggest a theoretical model for the plant manager who incorporates regulatory pressures into his calculations of optimal amount of pollution. Assuming actual pollution abatement exhibits a sluggish adjustment process, the theoretical model leads to an empirical AR(1) panel model. We estimate our model using GMM with both ''temporally lagged'' and ''spatially lagged'' instruments. We find that children, people below the poverty line and the smallest minority races are exposed to higher levels of pollution. Our findings show no evidence of environmental inequity against African-Americans or Hispanics, and find that the neighborhoods with a higher percentage of elderly population face signicantly lower levels of pollution from the plants.pollution abatement, environmental equity, dynamic panel, instrumental variable, fixed effects