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Environmental Regulation and Labor Demand: The Northern Spotted Owl

Paper Number: 2017-05

Document Date: 9/2017

Author(s): Ann E. Ferris

Subject Area(s): Distributional Effects, Economic Impacts, Environmental Policy

JEL Classification:

Q52 - Pollution Control Adoption Costs; Distributional Effects; Employment Effects
R11 - Regional Economic Activity: Growth; Development; and Changes

Keywords: employment effects, labor market impacts, environmental policy

Abstract: Environmental regulation can impact local labor markets, potentially reducing incomes and employment and inducing reallocation across sectors. The labor market consequences of environmental regulation are difficult to isolate because regulations frequently apply to large areas, such as the entire United States, and researchers cannot directly observe the counterfactual, in the absence of regulation. I claim that protection of the northern spotted owl in the Pacific Northwest in the 1990s led to an exogenous decline in labor demand in that region. I use this policy change to identify the local and regional impacts of endangered species regulation on employment and incomes in the timber industry. I estimate the local labor market impact of owl protection by comparing counties in the region with and without owl-protected areas. Depending on the choice of control areas and the inclusion of additional control factors, northern spotted owl protection plausibly led to a small loss of incomes and employment in the region.

This paper is part of the Environmental Economics Working Paper Series.

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