Discussion paper

DP19221 Regional and Aggregate Economic Consequences of Environmental Policy

This paper shows how to combine microeconometric evidence on the effects of environmental policy with a macroeconomic model, accounting for general equilibrium spillovers that have mostly been ignored in the literature. To this end, we study the effects of a recent US air pollution policy. We use regression evidence on the policy’s impact across industries and local labor markets to calibrate a quantitative spatial model allowing for general equilibrium spillovers. Our model implies that the policy lowered emissions by 11.1%, but destroyed approximately 250’000 jobs. Ignoring spillovers overestimates job losses in polluting industries, but underestimates job losses in clean industries.


Schmitz, T, I Colantone and G Ottaviano (2024), ‘DP19221 Regional and Aggregate Economic Consequences of Environmental Policy‘, CEPR Discussion Paper No. 19221. CEPR Press, Paris & London. https://cepr.org/publications/dp19221