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Working Paper: Effects of Socio-Economic and Input-Related Factors on Polluting Plants’ Location Decisions

Paper Number: 2008-08

Document Date: 08/2008

Author(s): Ann Wolverton

Subject Area(s): Environmental Policy; Cost of Pollution Control; Distributional Effects

Keywords: environmental justice; firm location

Abstract: Many environmental justice studies argue that firms choose to locate waste sites or polluting plants disproportionately in minority or poor communities. However, it is not uncommon for these studies to match site or plant location to contemporaneous socioeconomic characteristics instead of to characteristics at the time of siting. While this may provide important information on disproportionate impacts currently faced by these communities, it does not describe the relationship at the time of siting. Also, variables that are important to a plant's location decision – i.e., production and transportation costs -are often not included. Without controlling for such variables, it is difficult to evaluate the relative importance of socioeconomic characteristics in a firm’s initial location decision. This paper examines the role of community socioeconomic characteristics at the time of siting in the location decisions of manufacturing plants while controlling for other location-relevant factors such as input costs.

When plant location is matched to current socioeconomic characteristics results are consistent with what the environmental justice literature predicts: Race is significant and positively related to plant location, while income is significant and negatively related to plant location. When plant location is matched to socioeconomic characteristics at the time of siting, empirical results suggest that race is no longer significant, though income is still significant and negatively related to plant location. Poverty rates are sometimes significant but act as a deterrent to plant location. Variables traditionally considered in the firm location literature -such as land and labor costs, the quality of labor, and distance to rail -are significant. The presence of preexisting TRI plants in a neighborhood and average plant size are also significant.

Published: Wolverton, Ann. 2009. "Effects of Socio-Economic and Input-Related Factors on Polluting Plants' Location Decisions," The B.E. Journal of Economic Analysis & Policy, Advances. 9(1), Article 14.

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

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