Ivan Rudick, Cornell

This paper introduces an integrated spatial general equilibrium air quality assessment model to quantify the impact of the National Ambient Air Quality Standards (NAAQS) under the Clean Air Act. Using a quasi-experiment in regulatory changes, we use the model structure to guide estimation of the direct effects of nonattainment on emissions and productivity. We use these estimates in the model to simulate the economy-wide impacts of NAAQS nonattainment designations in the 1990s on emissions and productivity. The NAAQS increases welfare of 0.49 percent (or $19.3 billion per year); improved amenities account for a substantial portion of the overall effect, while real income losses are modest and concentrated among workers in polluting sectors. Approximately one fifth of the total benefits accrue to workers in counties that are in attainment. The results highlight the importance of accounting for the spatial linkages when quantifying the effects of environmental regulation.