Gray Et Al 2023 Environmental Regulation and Labor Demand What Does The Evidence Tell Us

Annual Review of Resource Economics
Environmental Regulation and

Labor Demand: What Does the
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Evidence Tell Us?

Annu. Rev. Resour. Econ. 2023.15:177-197. Downloaded from www.annualreviews.org
Wayne B. Gray,1 Ron Shadbegian,2 and Ann Wolverton3

1
Department of Economics, Clark University, Worcester, Massachusetts, USA;
email: wgray@clarku.edu
2
Department of Economics, San Diego State University, San Diego, California, USA
3
National Center for Environmental Economics, US Environmental Protection Agency,
Washington, DC, USA
Annu. Rev. Resour. Econ. 2023. 15:177–97 Keywords

First published as a Review in Advance on
employment, environmental regulation, labor demand
June 30, 2023
The Annual Review of Resource Economics is online at Abstract

resource.annualreviews.org
Understanding the potential effect of environmental regulation on em-
https://doi.org/10.1146/annurev-resource-101422-
ployment is of broad interest to key stakeholders. Concerns encompass
115834
both short- and longer-term effects on workers within the regulated sec-
This work is licensed under a Creative Commons
tor, affected communities that already suffer from a lack of employment
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unrestricted use, distribution, and reproduction in opportunities, and net employment in the overall economy. We begin our re-
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how environmental regulations might affect labor demand. We then summa-
other third-party material in this article for license
information. rize the main empirical findings from the literature, including sector-specific
partial equilibrium estimates and general equilibrium approaches to identi-
JEL codes: Q52, Q58
fying the employment impacts of regulations. We also briefly describe the
literature on how environmental regulations affect labor supply. Finally, we
discuss remaining research gaps.
177
1. INTRODUCTION
Industry, policy makers, and other key stakeholders have long been interested in understanding
the effects of environmental regulation on employment, including the short- and longer-term
effects on workers within the regulated sectors, affected communities that already suffer from a
lack of employment opportunities, and net employment in the overall economy. In general, more
stringent environmental regulations require polluting facilities to lower emissions by installing
abatement equipment or changing production processes that increase the marginal cost of produc-
tion, and therefore, other things equal, reduce output in the regulated sector. However, predicting
the net effect of environmental regulations on sectoral or even overall employment is complicated.
First, it can be difficult to disentangle the effects of regulation from other economic changes that
affect labor markets. Second, how labor markets respond to a new regulation depends in compli-
cated ways on a myriad of factors such as the supply and demand elasticities of labor, the ability
to substitute labor with other inputs, and existing market imperfections (e.g., existing regulations,
taxes, wage stickiness, structural unemployment).
Given the size of an economy like that of the United States, even a relatively large-scale en-
vironmental regulation is likely to be too small to have a noticeable impact on aggregate net
employment.1 In fact, as we see below, many economic models assume the economy is operat-
ing in long-run equilibrium, with full employment. In addition, any shifts in employment are
expected to be temporary as workers transition from one productive use to another (e.g., from
making steel or refining oil to engaging in various pollution abatement activities) (Arrow et al.
1996). However, while disruptions to the national workforce are expected to be small and short-
lived, sector-specific and localized changes in employment due to environmental regulation can
still be potentially disruptive for some individuals and communities. This may be particularly true
for older and less-educated workers who cannot easily transition to another job or for communi-
ties with already high levels of unemployment driven by long-term shifts in the structure of US
markets and technological change.2
If the economy is operating at less than full employment (i.e., some people who want to work at
the going market wage are unable to find jobs), then economic theory is even less definitive about
the direction or degree of the net impact of a new or more stringent environmental regulation on
employment. Moreover, it is even possible that the economy may experience a short-term increase
in net employment as previously unemployed workers are hired to help meet new requirements
(e.g., to undertake new pollution abatement activities) or by sectors producing new abatement
capital (Schmalansee & Stavins 2011).3
Given this context, our review begins by briefly outlining a theoretical framework used to
analyze how environmental regulations can affect labor demand in the regulated sector as well
1 For instance, the most expensive air regulation promulgated by the US Environmental Protection Agency
(US EPA) between 2003 and 2013 had annualized costs of about $11 billion (2014$), which is about 0.06% of
US gross domestic product (GDP) in 2014. The US Office of Management and Budget (US OMB 1995) only
anticipates macroeconomic effects from a regulation for the US economy when its economic impact reaches
0.25% to 0.5% of GDP.
2 For example, Weber (2020) examines the 45% decline in coal mining employment between 2011 and 2016,
finding that unemployment rose significantly in counties with coal employment declines and coal employ-
ment losses disproportionally affected poorer areas with already high unemployment rates. Note that these
declines were driven by changes in the price of natural gas relative to coal that were generally unrelated to
environmental regulation (Coglianese et al. 2020).
3 For more information on the types of jobs included in the environmental protection sector, see Nestor &
Pasurka (1995), Bezdek et al. (2008), US Dep. Labor (2012), and US Dep. Commer. (2010).
178 Gray • Shadbegian • Wolverton

as discussing potential spillovers to the broader economy. We next summarize the main findings
from the literature on both short- and long-term, sector-specific, partial equilibrium employment
impacts of regulations. Section 4 examines the potential indirect effects on nonregulated sectors
and the extent to which environmental regulations have been shown to have broader economy-
wide effects on employment. Finally, in Section 5 we identify remaining research gaps. Note that
while this review focuses on recent peer-reviewed literature, it references some of the so-called
gray (nonpeer-reviewed) literature when relevant.
2. THEORY
Net employment effects caused by environmental regulation consist of a combination of increases

and decreases in specific sectors of the economy and over time. For example, a newly promulgated
environmental regulation on mercury emissions from industrial boilers may decrease the demand
for production workers in the regulated plants but increase the plants’ demand for boilermakers
and engineers to produce and install new boilers, leading to an ambiguous effect on overall net em-
ployment. To better understand these competing employment effects, economic theory provides a
useful framework for identifying the channels by which environmental regulation can affect labor
markets.
Berman & Bui (2001a) develop an insightful theoretical microeconomic framework to demon-
strate how environmental regulation could affect labor demand in the regulated sector. The
Berman and Bui model is a generalization of Brown & Christensen’s (1981) partial static equi-
librium model (PSEM). The key feature of the PSEM model that Berman and Bui exploit is the
use of quasi-fixed factors (e.g., pollution abatement activities) whose levels are determined by ex-
ogenous constraints (e.g., environmental regulation) instead of solely by cost minimization. All
other factors of production are treated as variable.4 Treating pollution abatement activities as
quasi-fixed allows Berman and Bui to demonstrate that environmental regulation can affect la-
bor demand through two channels: the output elasticity of labor demand (output effect) and the
marginal rate of technical substitution between labor demand and pollution abatement activity
(technical substitution effect).5
More formally, assume that a perfectly competitive polluting facility minimizes costs by choos-
ing levels of the n variable inputs (V ) and m quasi-fixed inputs (QF ). This allows us to construct
the following variable cost function:6
CV = F (Y, W1 , W2 , . . . , Wn , QF1 , QF2 , . . . , QFm ), 1.
where Y is output and Wn are the variable input factor prices. Solving the first-order conditions
of the polluting facility’s cost minimization problem yields the following demand for labor as a
function of output, input prices, and the quasi-fixed inputs. Assuming the labor demand function
is linear we get
M N
L = δ + λy Y + ηm QFm + φnWn . 2.
m=1 n=1
4 This approach permits the use of a variable cost function which is minimized with respect to a subset of input
factors, conditional on both output and the levels of the “quasi-fixed” factors.
5 Morgenstern et al. (2002) disaggregate the regulatory-induced employment effect into three parts: the
demand effect, the cost effect, and the factor-shift effect.

6 Our notation is largely adopted from Berman & Bui (2001a).
www.annualreviews.org • Environmental Regulation and Labor Demand 179

The direct effect of environmental regulation on L is then
dL dY M dQFm N dWn
= λy + ηm + φn = μ. 3.
dR dR m=l dR n=l dR
The first term in Equation 3 captures the output effect of regulation on labor demand. Al-
though the output effect of environmental regulation is generally presumed to be negative,
Berman & Bui (2001a) argue that this effect can also be positive (e.g., if a polluting facility com-
plies with a regulation by investing in pollution abatement capital that lowers marginal production
costs). The second term captures how environmental regulation affects labor demand via its effect
on the demand for quasi-fixed abatement activities, QF, and the technical substitution effect. The
effect of regulation on the quasi-fixed factors [ dQF
dR
] must be positive as more stringent environ-
mental regulation necessarily increases the demand for pollution abatement activities. However,
the signs of the ηm coefficients can be either positive or negative depending on whether labor and
pollution abatement activities are substitutes or complements.7 This is the main reason why the
overall effect of environmental regulation on plant employment (μ) is ambiguous and cannot be
predicted from theory alone. Finally, it is generally assumed that input markets are competitive
and that the regulated sector makes up only a small share of demand in those sectors. When this
is the case, changes in regulatory stringency should not affect input prices, implying that the final
term in Equation 3 is zero.8
As discussed in the subsequent section, most partial equilibrium papers in this literature use
the framework of Berman & Bui (2001a) to inform their empirical specifications for identifying
the employment effect of a new or more stringent environmental regulation. Specifically, they
typically estimate a version of the following reduced-form equation:
L = o + μR + e. 4.
Here, R is the environmental regulation of interest, and μ is its estimated marginal effect on labor
demand L.
The above discussion describes the theoretical basis for analyzing potential employment ef-
fects at a firm within a regulated industry. It is important to emphasize that employment impacts
at a particular firm will not necessarily represent impacts for the overall industry; therefore, the
theoretic approach requires some adjustment when applied at the industry level. If regulations
affect some plants within an industry and not others, production and employment may shift away
from the regulated plants without having much impact on total employment in the industry. The
responsiveness of industry labor demand depends on how the output and substitution effects in-
teract, determining the total aggregate effect. If product demand is inelastic, then industry output
may not change much at all, even if regulation raises costs considerably. There could also be substi-
tution impacts on employment that vary by firm, depending on how increased pollution abatement
efforts change the production process. Regulated plants are often heterogeneous—they may have
somewhat different production technologies and emit at different rates, which may then imply
that the form and cost of compliance may differ. Depending on how these firm-level responses
aggregate, the total effect on industry-level employment could be positive, negative, or effectively
7 Pollution abatement activities can be separated into two broad types: end-of-pipe and change-in-production-
process techniques. An end-of-pipe pollution abatement technology could require additional labor to operate
and maintain the control equipment (complement), whereas a pollution control activity that updates the firm’s
productive capital stock may require less labor (substitute) to produce a given output quantity.
8 This need not always be the case; e.g., regulations on greenhouse gas emissions could substantially impact
the overall demand for coal.

zero. As with an individual firm, theory alone is unable to determine the sign or magnitude of
industry-level regulatory effects. To determine the sign and magnitude of the labor effects will
require empirical study.
Considering only the effects on the labor market from changes in the regulated sector yields a
partial picture of how environmental regulation might affect net employment. The offsetting em-
ployment effects of regulation on the environmental protection sector (which provides goods and
services to the regulated sector) could also be considered. Employment in the industry supplying
pollution control equipment is likely to increase with the increased demand from the regulated
industry for the equipment. Whether or not shifting resources from producing goods in the man-
ufacturing sector like steel and oil to producing pollution abatement equipment and services will
increase or decrease overall employment depends in part on the relative labor intensity of the dif-
ferent sectors. There is very little information on the relative labor intensity of the environmental
protection sector relative to other sectors, but Becker & Shadbegian (2009) find that manufactur-
ing plants supplying products in the environmental sector had significantly higher capital-labor
ratios. This suggests that shifting resources into the environmental protection sector may lead to
lower net employment, all else equal.
Lastly, a broader economy-wide lens may capture additional effects on labor markets from en-
vironmental regulation. For instance, one might consider how sectors that supply inputs to or use
the regulated sector’s product as an input into production respond to changes in the regulated
sector’s behavior. Pre-existing distortions in the form of other regulations or taxes may also in-
teract with labor market decisions in ways that affect the overall effect on employment.9 Finally,
environmental regulations may result in shifts in demand away from relatively more expensive
regulated goods to unregulated goods. This, in turn, may have effects on the degree to which
specific goods are imported or exported. Both have implications for the net effect on US labor
demand. Research that relies on economy-wide models that attempt to incorporate these types of
spillovers across different sectors and regions is discussed in Section 4.
3. PARTIAL EQUILIBRIUM STUDIES

3.1. Regulatory Impacts on Productivity and Labor Demand
There is an extensive and well-established peer-reviewed empirical literature analyzing the effects
of environmental regulation on productivity. Interest in measuring these effects was spurred by the
passage of the Clean Water and Clean Air Acts in the 1970s during a time of productivity slowdown
in the United States. Economists naturally asked whether environmental regulation played any
role in that slowdown. Several studies using establishment-level (e.g., Gollop & Roberts 1983, Färe
et al. 1989) and industry-level (e.g., Gray 1987, Barbera & McConnell 1986, Barbera & McConnell
1990) data find that environmental regulations had large, negative effects on productivity.10
More recent studies, all of which use microdata and more sophisticated empirical techniques,
find more mixed results. Berman & Bui (2001b), Shadbegian & Gray (2005), Färe et al. (2007),
Aiken et al. (2009), and Becker (2011) find that more stringent environmental regulations do not
lead to adverse productivity effects. In fact, Berman and Bui find the opposite: Productivity at
9 After accounting for interactions between sectors, input substitution, and pre-existing distortions in capital
and labor markets, Marten et al. (2019) find that the social costs of sector-specific environmental regulations
are 6–33% greater than compliance expenditures.
10 Pizer & Kopp (2005) discuss the wide range of estimates from these studies, which range from 8% to 12%
of the slowdown being attributable to environmental regulation for the economy as a whole to 10% to as high
as 44% of productivity losses in specific industries.

more stringently regulated oil refineries in the heavily regulated Los Angeles air basin actually
increased during their study period. On the other hand, Boyd & McClelland (1999), Gray &
Shadbegian (2003), Greenstone et al. (2012), and Liu et al. (2022) estimate that more stringent
regulations reduce productivity by 3% to 14%, which overlaps with, but is generally much smaller
than, estimates from the 1980s.11
Research focused specifically on estimating the employment effects of environmental regu-
lations is newer but has been growing rapidly. The focus of this literature has mainly been on
identifying effects on employment in the directly regulated sector, ignoring the possibility of la-
bor market effects elsewhere in the economy. Thus, many of these studies can speak to gross but
not necessarily net effects on employment. For instance, partial equilibrium studies that examine
effects on employment within a regulated sector capture decreases in production, changes in the
use of labor due to some inputs being relatively more costly, and increases in demand for labor
to install and operate pollution control equipment. These studies, however, do not capture any
changes in labor demand outside of the regulated sector.

In addition, many of the studies discussed below use a difference-in-differences identification
strategy, comparing plants or areas directly affected by regulation to those that are not directly af-
fected (e.g., attainment versus nonattainment counties). However, this identification strategy rests
on the comparison group being untreated. If some jobs move out of the regulated sector or area
into the relatively unregulated sector or area to which it is being compared, the employment ef-
fects on the regulated sector will be overstated. We discuss the possibility of spillovers in Section 4
and call for more research in this area in Section 5.
In general, the peer-reviewed literature finds that environmental regulations have had very lit-
tle effect on employment in the regulated industry (see Table 1). One of the earliest empirical
studies was by Berman & Bui (2001a). They combine a unique database of all significant national,
state, and local environmental regulations affecting the Los Angeles area of California between
1979 and 1992, which they collected by interviewing regulators and a sample of the regulated fa-
cilities. These data are then merged with establishment-level information on capital, labor, energy
and materials inputs, and pollution abatement spending from the US Census Bureau.12 Berman
and Bui find that affected facilities increased air pollution abatement expenditures much more
than other facilities, increasing operating costs by almost twice the national average and increas-
ing capital expenditures by ten times as much. However, comparing changes in employment at
the affected manufacturing facilities to employment changes at similar facilities in other regions
not subject to the regulations, they find no evidence that these new environmental requirements
reduced employment, and that they may even have increased employment slightly. Using similar
plant-level data as well as a difference-in-differences approach, Gray et al. (2014) examine how
the US EPA’s 1997 Cluster Rule affected employment at regulated pulp and paper mills. They
find that the Cluster Rule caused relatively small decreases in labor demand (i.e., 3% to 7%), but
these effects are not always statistically significant.
Greenstone (2002) uses similar US Census Bureau establishment-level data for all US man-
ufacturing facilities from 1972 to 1987 in a difference-in-differences framework to examine the
employment effects of the National Ambient Air Quality Standards (NAAQS) for criteria air
11 Other studies examining various other economic consequences of environmental regulation (e.g., plant
openings and closings, technology choice, technological change, efficiency, investment, competitiveness) of
environmental regulation include those by Färe et al. (1986), Henderson (1996), Gray & Shadbegian (1998),
Becker & Henderson (2000), List et al. (2003), Aldy & Pizer (2015), and Morgan et al. (2023), among others.
12 Specifically, Berman & Bui (2001a) used the Longitudinal Business Database (see Jarmin & Miranda 2002)
and the Pollution Abatement Costs and Expenditures survey (see Becker & Shadbegian 2005).

Table 1 Partial equilibrium empirical studies of employment
Empirical
Study Country Data approach Regulatory measure Findings
Abrell et al. (2011) Europe Firm Triple difference EU ETS Zero
Anger & Oberndorfer Germany Firm 2SLS EU ETS Zero
(2008)
Berman & Bui (2001a) United States Plant OLS Local air regulations Zero
Chan et al. (2013) Europe Firm DiD EU ETS Zero
Cole & Elliott (2007) United Kingdom Industry 3SLS Pollution abatement costs Zero
Färe et al. (2018) United States Plant DEA SO2 emissions Illustrative
Ferris et al. (2014) United States Plant DiD Acid rain cap and trade Zero
Gray et al. (2014) United States Plant DiD Cluster rule Negative
Gray & Shadbegian (2014) United States Industry OLS Abatement costs Negative
Greenstone (2002) United States Plant OLS NAAQS nonattainment Negative

Hille & Möbius (2019) OECD Industry Dynamic GMM Energy prices Positive
Kahn & Mansur (2013) United States Industry OLS and IV NAAQS nonattainment Negative
Liu et al. (2017) China Plant DiD COD discharges Negative
Liu et al. (2021) China Firm DiD Key Cities for Air Pollution Negative
Control
Marin et al. (2018) Europe Firm DiD EU ETS Zero
Marin & Vona (2021) France Plant IV Energy prices Negative
Sheriff et al. (2019) United States Plant DiD NOx RACT Negative
Walker (2011) United States Plant DiD NAAQS nonattainment Negative
Walker (2013) United States Sector DiD NAAQS nonattainment Negative
Wang et al. (2022) China Firm DiD and IV SO2 trading program Negative
Wolverton et al. (2022) United States Plant DiD and IV Renewable portfolio standards Negative
Abbreviations: 2SLS, two-stage least squares; 3SLS, three-stage least squares; COD, chemical oxygen demand; DEA, data envelopment analysis; DiD,
difference-in-differences; ETS, Emissions Trading System; EU, European Union; GMM, generalized method of moments; IV, instrumental variables;
NAAQS, National Ambient Air Quality Standards; NOx, nitrogen oxide; OECD, Organisation for Economic Co-operation and Development; OLS,
ordinary least squares; RACT, Reasonably Available Control Technology; SO2 , sulfur dioxide.
pollutants including sulfur dioxide (SO2 ), ozone (O3 ), carbon monoxide (CO), and particulate
matter. However, his identifying strategy relies on attainment status as a proxy for differences
in regulatory stringency across counties; a county out of attainment with one or more of the
NAAQS is subject to a variety of costly regulations designed to bring the area into compliance.
Greenstone finds that the first 15 years of the Clean Air Act led to a decline of about 3% in gross
manufacturing employment in nonattainment counties relative to attainment counties (roughly
600,000 jobs). It is important to note, however, that this result does not imply that the economy
lost 600,000 jobs. It is possible, and even likely, that at least some of these jobs shifted from
nonattainment to attainment areas. Sheriff et al. (2019) find that new regulatory requirements as-
sociated with more severe ozone nonattainment (not simply ozone nonattainment status) reduced
power plant employment by approximately 13%. On the other hand, they find no significant
effects on electricity generation, suggesting that new pollution abatement equipment could have
led to labor-saving technological change at regulated power plants. Finally, using County Business
Patterns data, Kahn & Mansur (2013) find evidence that manufacturing industries located in
ozone nonattainment counties experienced lower employment growth relative to manufacturing
industries in attainment counties, particularly in energy-intensive industries.

Cole & Elliott (2007) and Gray & Shadbegian (2014) estimate models similar to Berman &
Bui (2001a), but with industry-level data and less-detailed information on environmental reg-
ulations. Cole and Elliott measure the stringency of environmental regulation as the ratio of
pollution abatement costs to gross value-added and pollution abatement capital expenditures to
total capital expenditures, whereas Gray and Shadbegian measure the stringency of regulation as
the ratio of pollution abatement operating costs to output. Cole and Elliott find no significant ef-
fect of environmental regulation on labor demand in the United Kingdom (1999–2003); Gray and
Shadbegian find a very small, yet statistically significant, effect of regulation on US manufacturing
employment (1973–1994). Färe et al. (2018) specified two input distance functions that model the
joint production of good and bad outputs. One treats the bad output as freely disposable, while the
other does not. By comparing the two, they are able to calculate the employment implications of
pollution abatement without data on inputs assigned to those activities, an important contribution
given the current lack of pollution abatement cost data in the United States.
Several other studies examine the effect of more flexible regulations that put a price on emis-
sions, including the use of tradable permits to meet emission rate requirements. We would expect
that, other things equal, these more flexible regulations would have even smaller overall employ-
ment effects than more prescriptive regulations. Research examining how the European Union
Emissions Trading System affects employment generally finds no statistical evidence that envi-
ronmental regulation reduced labor demand (e.g., Anger & Oberndorfer 2008, Abrell et al. 2011,
Chan et al. 2013, Marin et al. 2018). Similarly, Ferris et al. (2014) find that Phase 1 of the US SO2
trading program, designed to substantially reduce emissions from the dirtiest coal fired power
plants, did not cause significant decreases in employment. They also examined employment ef-
fects for an overlapping but not identical set of electricity-generating plants subject to a less flexible
NOx regulation: Employment effects at plants subject to the NOx standards were actually positive
postpromulgation.
Similar to Greenstone (2002), Walker (2011) uses NAAQS attainment status as a proxy for
differences in relative stringency, though Walker focuses exclusively on coarse particles (PM10 ).
Walker contributes to the literature by decomposing employment changes into job creation (based
on those plants that increased employment) and job destruction (based on those plants that
decreased employment).
Similar to other studies, he finds statistically significant declines in gross manufacturing em-
ployment in the polluting sectors in nonattainment counties relative to attainment counties. He
concludes that most of these gross job losses are due to higher levels of plant-level job destruc-
tion associated with regulation (e.g., firings or shifting workers from regulated plants to other
plants), rather than reduced hiring rates. In follow-up work, Walker (2013) monetizes the transi-
tion costs associated mainly with involuntary job loss, finding an aggregate loss of nearly $9 billion
in foregone earnings due to more stringent PM10 regulations.
Contrary to the assumption in the Berman & Bui (2001a) theoretical framework, in some
cases environmental regulations can also affect input prices and thereby affect labor demand. For
example, more stringent environmental regulations directed at the power sector may cause man-
ufacturing facilities to face higher electricity prices. Using disaggregated plant-level data from
the US Census Bureau and treating electricity as an endogenous variable, Wolverton et al. (2022)
find that electricity price increases caused by state-level renewable portfolio standards have rela-
tively small, negative effects on employment even in energy-intensive, trade-exposed industries.13
13 Renewable portfolio standards require electric utilities to produce a certain amount of their electricity
each year from renewable sources including wind and solar (Barbose 2019), which can potentially increase
generation costs.

Relying on similarly detailed data for France and treating electricity as endogenous, Marin &
Vona (2021) also find small, negative effects on employment and no significant effect on wages
due to energy price increases. Again, these negative effects are focused on energy-intensive, trade-
exposed sectors. Hille & Möbius (2019), using multi-country, industry-level data, find that higher
energy prices have, on average, a positive net effect on economy-wide employment. This positive
employment effect is driven primarily by positive cost effects, which are greater than the combined
negative demand effects and decreases in the (positive) factor-shift effects.14
The papers reviewed above focus on measuring the effects of environmental regulation on
labor markets in developed countries. The question of how environmental regulations affect
employment is arguably even more important in developing countries where structural unem-
ployment and underemployment are significant concerns as they try to balance economic growth
(and growth in jobs) with improvements in environmental quality. For example, China’s adoption
of more stringent regulations to address some of its major environmental issues has led to a rel-
atively large literature examining how they have affected labor demand in China. Three recent
papers by Liu et al. (2017, 2021) and Wang et al. (2022) use detailed firm-level data in China
and find that more stringent environmental regulations led to small decreases in labor demand,
though each of these studies found heterogeneous effects by firm type (e.g., domestic, state-owned,
foreign-owned) and type of worker (e.g., high- versus low-skilled).
3.2. Air Quality Impacts on Labor Supply and Productivity

Although most of the published research focuses on how environmental regulations affect labor
demand, there is a small but growing literature that investigates how improvements in air qual-
ity via environmental regulation could potentially affect labor supply, both the quantity of labor
supplied and its productivity. On the quantity side, Hanna & Oliva (2015) find that a large reduc-
tion in SO2 emissions in Mexico City leads to a small but significant increase in hours worked.
Aragon et al. (2017) find that even moderately high levels of fine particles significantly reduce
hours worked. On the productivity side, Graff Zivin & Neidell (2012) were the first to use de-
tailed worker-level data to examine the effects of ambient quality on US labor productivity. They
find that higher levels of ozone had significant adverse effect on the productivity of farm workers
in California, even though the exposure levels were still below the NAAQS. Using a similar ap-
proach, Chang et al. (2016) find that higher levels of fine particles reduced the productivity of pear
packers in northern California. Archsmith et al. (2018) also show that lower ambient air quality
in the United States can lead to errors in the professional judgments of workers. Finally, three re-
cent studies using detailed data on worker productivity in China by Chang et al. (2019), He et al.
(2019), and Kahn & Li (2020) find that lower ambient air quality reduced worker productivity in
both manufacturing and professional settings.
How would these changes affect employment? Increases in labor supply from air quality im-
provements should lead to greater employment. While the impacts of productivity changes on
employment are ambiguous, researchers have found that increases in productivity are associated
with increases in employment, including Salter (1966) using industry-level data and Van Reenen
(1997) using firm-level data.
4. GENERAL EQUILIBRIUM EFFECTS ON LABOR MARKETS

Computable general equilibrium (CGE) models are often used to understand the welfare and
distributional implications of price and quantity changes in one sector of the economy as they
14 See Morgenstern et al. (2002) for a description of these three effects.

propagate through the economy. CGE models are aggregate representations of the economy
in equilibrium (i.e., all markets clear). Although they often have a single representative firm for
each industry and a single labor market, they are predicated on microeconomic theory (e.g., pro-
ducers profit maximize; consumers maximize utility subject to a budget constraint) and capture
substitution possibilities between production, consumption, and trade, as well as interactions be-
tween economic sectors and with pre-existing distortions (e.g., labor taxes). Responsiveness of
endogenous variables (e.g., labor, capital, output) are calibrated to empirically estimated parame-
ters available in the literature. By construct, they typically assume immediate adjustments to a new
equilibrium set of prices and quantities after the introduction of a policy shock. In other words,
the labor market clears instantaneously.
Although partial equilibrium approaches that rely on detailed data can provide a rich apprecia-
tion for how environmental requirements affect firms in the regulated sector, CGE models provide
insights into the broader implications a new regulation may have on sectors beyond those that are
directly regulated. However, CGE models, as typically constructed, are useful for understanding
shifts in labor demand and supply across sectors in the economy, but they typically cannot provide
much insight into the effects on net overall employment because they assume full employment
(Boeters & Savard 2013, Hafstead & Williams 2020). Whereas early CGE models assumed fixed
labor supply, more recent models allow it to adjust endogenously in response to changes in the
real wage and/or nonwage income. To allow labor supply to adjust, the utility function of the rep-
resentative household includes leisure (i.e., consumers make trade-offs between labor and leisure
as the wage changes). However, changes in employment are all still voluntary, meaning if the rep-
resentative household’s reservation wage is higher than the prevailing wage then it will choose to
work less and consume more leisure.
4.1. Incorporating Unemployment in CGE Models

Involuntary unemployment—when a worker is willing to work at the prevailing wage rate but can-
not find a job—has been incorporated into a small set of CGE models as an equilibrium condition
using a reduced form, wage curve approach. The wage curve is based on the empirical observations
of Blanchflower & Oswald (1994) that real wages are a decreasing function of the unemployment
rate.15,16 This approach amounts to an exogenous assumption about the level of unemployment
in the economy. Research that has used this approach generally finds relatively small increases in
overall unemployment in response to the introduction of an environmental policy (e.g., Böhringer
et al. 2012, 2013; Dissou & Sun 2013; Rivers 2013; McKibbin & Wilcoxen 2013).
Explicit representation of a wage-setting mechanism in a CGE model is less common in the
environmental economics literature. Balistreri (2002) represents frictional unemployment in a
dynamic CGE model of the United States via a reduced-form representation where there is a
return for not supplying labor (i.e., the reservation wage) and a search cost that is a function of
the level of employment in the economy and the number of workers actively looking for a job.
15 In practice, the wage curve approach shifts labor supply inward; while the equilibrium wage is at the in-
tersection of the labor demand and wage curves, equilibrium employment is given by the intersection of the
labor supply curve at that equilibrium wage. Thus, estimated impacts on employment, particularly involuntary
unemployment, are determined by the assumed magnitude of the shift in the wage curve.
16 There is also an international trade literature that pairs country-specific empirical estimates of the cost for
workers to transition between sectors with dynamic, structural general equilibrium trade models. The cost of
switching from one sector to another is high (i.e., several times the average annual wage); in spite of these
costs, workers frequently switch sectors owing to unobserved factors (for a review of this literature, see Riker
& Swanson 2016).

Balistreri (2002) shows that a higher elasticity of substitution between labor and leisure leads
to larger and more persistent unemployment. Dixon et al. (2011) allow for potential short-run
disequilibrium in the US labor market by assuming a cost of moving between labor states (i.e.,
into and out of the labor force and/or between being employed and unemployed). They introduce
additional frictions by assuming that employed labor is industry-, occupation-, and region-specific
(e.g., the degree to which employed labor can move from one occupation to another is governed
by their similarity to one another).17 Shimer (2013) develops a stylized two-sector (one clean,
one polluting) general equilibrium model that incorporates search unemployment. The cost of
searching for a new job in the clean sector combined with human capital specific to the production
of only one good results in a loss of productivity if a worker switches from one sector to the other.
Hafstead & Williams (2018) also develop a two-sector (one clean, one polluting) general equi-
librium model, but it is notable for its explicit and much more detailed representation of dynamic
search frictions compared to previous work. Long-term involuntary unemployment is introduced
into the model through a constant returns-to-scale matching function along with the potential
for above-market wages to retain workers (building on Mortensen & Pissarides 1994). The rate
at which firms successfully hire workers is a function of both aggregate recruiting effort in that
sector and the number of unemployed workers searching for a job within a sector. Via a Nash bar-
gaining process, workers are compensated at a rate equal to the opportunity cost of not searching
for another job (i.e., the easier it is for a worker to find a new job, the higher their current wage
must be to induce them to remain). However, sectors compete for workers, so higher recruiting
efforts in one sector reduce the probability of a match in the other sector. When an emissions tax
is introduced into the model, Hafstead & Williams (2018) find that, although employment fell in
the polluting sector, it was largely offset by a gain in the nonpolluting sector. The net effect on
unemployment is even smaller when tax revenues are used to offset pre-existing distortions in the
labor market (i.e., payroll taxes).18
Other researchers have attempted to allow for temporary labor market disequilibrium in
dynamic CGE models (e.g., Dixon & Rimmer 2002, McKibbin & Wilcoxen 2013). For instance,
by assuming workers incur a cost to retrain when they change jobs or employment states,
Dixon & Rimmer (2002) allow for the possibility of labor demand-supply imbalances in the
short run. Dynamic, stochastic general equilibrium (DSGE) macroeconomic models have also
been used to introduce short-run disequilibria. These models are highly aggregated, stylized
representations of the economy that assume long-run full employment but introduce random,
transitory exogenous shocks to the economy (Arora 2013, Rogerson 2015).19 Gibson & Heutel
(2020) explicitly incorporate unemployment via a job search and matching mechanism into a
DSGE real business cycle model. Unlike previous scholars, they are able to accommodate both
long-run involuntary unemployment and short-run labor market disequilibrium in their model.
Gibson & Heutel (2020) find that employment and environmental externalities are too high in the
unregulated market compared to the efficient outcome, justifying the need for two separate policy
instruments.
17 See Babiker & Eckaus (2007) for an example of a global CGE model that allows for unemployment via
limited sectoral labor mobility and sectoral wage adjustment.
18 In one extension, Hafstead & Williams (2018) show that when wages cannot be renegotiated in every period,
short-run frictions slow the pace at which wages adjust to the long-run equilibrium rate.
19 DSGE models are grounded in microeconomic theory. As in many CGE models, each agent is assumed
to make an optimal choice, taking into account prices and the strategies of other agents. For a review of the
literature using DSGE models to examine the implications of environmental policy, see Annicchiarico et al.
(2022).

4.2. Employment Estimates from Input-Output Macroeconometric Models
Input-output (I-O)-based macroeconometric models also allow for short-run market imbalances,
e.g., cyclical unemployment, by assuming imperfect knowledge of product and factor markets
(West 1995, US EPA 2010). The labor market is typically represented in these models by a set
of equations that relate changes in wages to the unemployment rate, indexed to consumer prices
(OECD 2004, Guivarch et al. 2011). In some cases, they may also include a labor productivity
effect (OECD 2004). Using this approach, Barker et al. (2007) find almost no effect of energy
efficiency policies on employment in the United Kingdom. Lehr et al. (2012) find positive net
employment effects due to the expansion of renewable energy in Germany, but their results are
sensitive to a variety of assumptions.
Because I-O macroeconometric models are reduced-form representations designed to reflect

underlying time series data, they are only valid if the historical relationships embedded within
them are reasonable predictors of future effects (US EPA 2017). While this may be valid for
relatively small shocks, these historical relationships cannot capture behavioral responses to out-
of-sample shocks (Lucas 1976). In addition, a lack of theoretical grounding and the large number
of equations typical of this class of models can make it difficult to disentangle the mechanisms
driving the results (US EPA 2010).
4.3. Employment Estimates from Economy-Wide Models in the Gray Literature

A substantial number of studies of the potential economy-wide effects of US environmental
regulation on employment have also been sponsored by industry or other interested parties.
These are not typically peer reviewed—they reside in the so-called gray literature—but are
relied on frequently to provide input into the regulatory process. US EPA (2016) conducted a
survey of these studies conducted between 2008 and 2015 and identified 15 that estimate the
potential effects of US environmental regulations on employment (Table 2). Two-thirds of these
studies focus on regulations in the electric utility sector [e.g., Clean Power Plan (CPP), Mercury
Air Toxics Standards (MATS), Cross-State Air Pollution Rule (CSAPR)]. Another quarter of
the studies focus on regulations that affect facilities in multiple sectors [e.g., Boiler Maximum
Achievable Control Technology (MACT) or Ozone NAAQS].20 Of the 15 studies, it is notable
that two-thirds also use assumptions that varied, often substantially, from those of the US EPA,
which promulgated the regulations. However, they rarely evaluate the sensitivity of their results
to these alternative assumptions. The specific modeling approaches also vary across studies, with
nearly half relying on an I-O model. Another one-third of the studies rely on a specific US CGE
model (NewERA). A single study utilizes an I-O macroeconometric model (Inforum LIFT).
Model choice can have a large influence on the direction and magnitude of estimated em-
ployment effects. While I-O models map flows of goods and factors of production at a highly
disaggregated level, they assume a fixed, strictly proportional relationship between inputs (e.g.,
labor) and outputs and that output and factor input prices do not change in response to pol-
icy. In contrast, CGE models allow both prices and quantities to respond to the environmental
regulation and then propagate through the economy. I-O-based macroeconometric models also
allow for behavioral responses, though they are calibrated to historical relationships. Because I-O
models ignore the role of price and input factor substitution, they tend to overestimate the
net employment effects of a policy relative to these other approaches (Hoffmann et al. 1996,
20 Seven studies evaluate the combined effects of several proposed and final regulations. In a few cases, a study
preceded the US EPA’s proposed rule; thus, the scenarios analyzed are hypothetical (i.e., a guess of what the
US EPA might do).

Table 2 Estimated economy-wide employment effects of the US EPA air regulations collected from the gray literature
Use EPA input Use EPA policy Model type (specific
Reference EPA regulation assumptions? scenarios? model name)
Baum & Luria (2010) CAFE (H) No No I-O (with REMI multipliers)
Bivens (2015) CPP (P) Yes Yes I-O + VAR and state-panel
regressions
Busch et al. (2012) LDV GHG, MY 2017–2025 Yes Yes I-O (DEEPER)
(P)
Cicchetti (2011) MATS (P) Yes Yes I-O (RIMS II)
IHS Glob. Insight (2010) Boiler MACT (P) No Yes I-O (IMPLAN)
Goldberg (2010) MDHDV GHG (P) No No I-O (IMPLAN)

Harrison et al. (2011) CSAPR (F) No Yes I-O Macroeconomic
MATS (P) No Yes (REMI PI+)
316(b) (P), CCR (P) Yes Yes

Harrison & Smith (2012) MATS (F) No Yes CGE (NewERA)
Regional Haze, PM NAAQS No No
(H)
Ozone NAAQS (H) Yes No
SO2 NAAQS (F), 316(b), Yes Yes
CCR (P)
Harrison & Smith (2014) Ozone NAAQS (H) No No CGE (NewERA)
Harrison & Smith (2015) Ozone NAAQS (P) No Yes CGE (NewERA)
Heintz et al. (2011) MATS and Transport (H/P) No No I-O (IMPLAN)
IeC & IERF (2015) CPP (P) Yes Yes I-O Macroeconometric
(Inforum LIFT)
NERA (2011) MATS and Transport (P) No No I-O Macroeconomic (REMI)
Smith et al. (2012) MATS (F) Yes Yes CGE (NewERA)
Smith et al. (2013) CSAPR (F), Boiler MACT (F) No Yes CGE (NewERA)
Ozone NAAQS (P) No No
Table based on data from US EPA (2016).

Abbreviations: CAFE, Corporate Average Fuel Economy; CCR, coal combustion residual; CGE, computable general equilibrium; CPP, Clean Power Plan;
CSAPR, Cross-State Air Pollution Rule; EPA, US Environmental Protection Agency; F, final regulation; GHG, greenhouse gas; H, hypothetical regulation;
I-O, input-output; LDV, light-duty vehicle; MACT, Maximum Achievable Control Technology; MATS, Mercury Air Toxics Standards; MDHDV, medium
duty-heavy-duty vehicle; MY, model year; NAAQS, National Ambient Air Quality Standards; P, proposed regulation; SO2 , sulfur dioxide; VAR, vector
autoaggression.
US EPA 2010). A comparison of two studies of the CPP proposal further illustrates this point.
Although each study examines similar policy scenarios and utilizes similar assumptions, Bivens
(2015), who relies on an I-O approach, estimates additional jobs in 2020 almost five times higher
than the estimates of IeC & IERF (2015), who use an I-O macroeconometric model.21
The US EPA (2016) also observed that studies in the gray literature of the employment ef-
fects of regulation typically express results as changes in the number of jobs, job-years, or job
equivalents, but they vary in the extent to which the chosen metric is clearly defined. In addition,
very few of the 15 studies compare their estimates to baseline levels to understand the relative
21 IeC & IERF (2015) estimate a 0.1–0.2% net gain in employment by 2040. While positive employment
effects due to environmental regulation may seem counterintuitive, the CPP was expected to result in positive
price changes in some energy markets as well as investments in energy efficiency by both households and firms
that were predicted to result in positive net returns from these investments.

magnitude of the effect. Studies relying on the NewERA CGE model during this time period con-
vert voluntary changes in labor and leisure in response to wage changes to a loss of job-equivalents
(e.g., Harrison & Smith 2014, 2015). Advice provided to the EPA by its technical review board of
independent experts (US EPA 2017) opines that full employment CGE models should avoid this
type of conversion because it may be misinterpreted as an increase in unemployment. In addition,
such a conversion is predicated on the erroneous assumption that percent changes in labor hours
are equivalent to percent changes in number of jobs, which likely overestimate employment effects
(Hafstead et al. 2022).
5. FUTURE RESEARCH DIRECTIONS

In this review, we examine a wide range of approaches to measuring the impact of environmental
regulations on employment, from partial equilibrium models looking at impacts within a single
industry to general equilibrium models that emphasize the flows of economic activity across broad
sectors. Each approach has its advantages and disadvantages, but most of them have found small
impacts on net employment overall, which is not surprising given their magnitude relative to the
size of the economy.
In spite of this growing literature, many aspects of how environmental regulation might af-
fect labor markets still remain relatively understudied and would benefit from further attention
by researchers. These include identifying the short-run effects of environmental policy on labor
markets, understanding how effects may vary with worker characteristics or local labor market
conditions, evaluating the interplay between environmental regulation and labor supply, under-
standing how important adequately accounting for potential spillovers between regulated and
nonregulated sectors is when identifying the partial equilibrium effects on employment, and find-
ing better ways to identify labor market effects at a more granular level ex ante. We briefly describe
each one in this section in the hope that we inspire young researchers to contribute their insights
into these areas.
Although the potential for short-run disruptions to workers in the regulated and other sectors
after the implementation of an environmental regulation is of great interest, there has been rela-
tively little empirical investigation to date. This is in part because separately identifying the effects
of environmental regulation from the general churn of the labor market is challenging. Hafstead
& Williams (2020) layer on additional search frictions to their CGE model with search-match to
allow for short-run unemployment (i.e., lower success in cross-industry matching and wage bar-
gaining). There is also great potential from recent work that introduces real business cycles into
dynamic general equilibrium models with search frictions (e.g., Gibson & Heutel 2020). However,
these models tend to be highly aggregated representations of the economy and therefore cannot
necessarily be used to study the effects of a specific environmental policy.
Labor markets may clear relatively quickly for some types of workers and less so for others
(e.g., older, less-educated, or manual workers). Research on the implications of skill-biased tech-
nological change in the macroeconomic literature suggests that limited occupational mobility for
relatively unskilled workers has contributed to wage and job polarization in the United States over
the past several decades (Acemoglu & Autor 2011, Cortes 2016). However, the effect of environ-
mental regulation on different types of workers remains relatively understudied. Results from a
few recent studies are suggestive: Using a longitudinal data set, Marin & Vona (2019) demonstrate
that climate policy—proxied by energy prices over time—has also favored skilled over manual
workers, further exacerbating this trend. Using a CGE model, Chateau et al. (2018) show that un-
skilled workers experience greater job turnover in response to climate policies. Further, insights
from Walker (2011, 2013) into the mechanisms through which job loss occurs—layoffs versus

slower hiring—could be combined with an assessment of the types of workers most vulnerable to
each.
When employment losses are geographically concentrated, the costs to workers and commu-
nities can be deeper and long-lasting. The rapid expansion of Chinese exports to the United States
and other countries has been extensively studied, finding considerable impact on local labor mar-
kets with concentrations of import-competing firms. This results in out-migration by more mobile
young workers, but employment declines persist over a decade later, with substantial exit from the
labor force by older workers and increased payments from Social Security and Medicare in the
United States (Autor et al. 2013, 2021). These impacts seem to be bigger in areas with lower levels
of education among workers (Eriksson et al. 2021). For instance, mass layoffs in Germany have
resulted in large local employment declines; workers under 50 move away while older workers
remain (Gathmann et al. 2020). The long-term decline in coal industry employment, linked to
environmental concerns as well as other factors, has also been found to have long-lasting impacts
on local areas (Weber 2020). Autor et al. (2021) find evidence of very slow out-migration from coal
areas, perhaps connected to generational ties among the workforce. Hafstead & Williams (2020)
also show that there is potential for substantial impacts on workers in specific industries.
Understanding how improvements in air quality induced by environmental regulation can af-
fect workers’ labor supply and labor productivity is important for assessing the general equilibrium
feedbacks between compliance behavior and labor productivity. To date, the extant literature has
mainly focused on a narrow set of specific outdoor occupations (e.g., Graff Zivin & Neidell 2012,
Chang et al. 2016) or countries with much higher pollution levels than the United States (Chang
et al. 2019, He et al. 2019). However, there is still little known about the extent to which effects of
air quality on worker productivity vary across regions and occupations. This limits analysts’ ability
to incorporate these insights into a model that can accommodate feedbacks between labor supply
and other aspects of the economy.
Job spillovers between regulated and unregulated firms are missed by current partial equilib-
rium empirical approaches. Without a way to address them, these studies can only generate gross
estimates of employment effects in specific regions or industries. General equilibrium models can
accommodate spillovers but often are limited in their ability to capture sectoral and regional het-
erogeneity. Recent unpublished theoretical work by Butts (2021) proposes an extension of the
difference-in-differences framework to address spatial spillovers. He finds that under certain con-
ditions, including an indicator variable for being located close to a treated facility will fully remove
the bias in the estimated treatment effect. However, more research is needed to overcome the
problem of estimating net jobs effects when regulations cause regulated facilities to shift jobs to
similar nontreated facilities located far from the treated facilities and to other sectors.22
Finally, it is worth noting that econometric studies, while often relying on highly disaggre-
gated rich data sets, are focused on identifying the employment effects of policies ex post. General
equilibrium modeling can accommodate ex ante evaluation but often does not have the ability to
represent sectors at the level of detail of interest to key stakeholders. This often leaves decision
makers with few options for trying to characterize the potential effects of environmental policy
on labor markets ex ante. Understanding what aspects of empirical findings about one regulation
might generalize to other regulations or identifying ways to bring greater rigor to ex ante policy
analysis would be a useful contribution.
22 Zhou et al. (2020) examine a different notion of spillovers. They show that information spillovers between
participants and nonparticipants in a voluntary program have a theoretically ambiguous effect on emission re-
ductions. They modify their empirical model to allow for the possibility of spillovers, measured as the share of
facilities in the same industry that participate in the program. A larger share of participating facilities increases
the likelihood of information spillovers to nonparticipating plants.

DISCLOSURE STATEMENT
The authors are not aware of any affiliations, memberships, funding, or financial holdings that
might be perceived as affecting the objectivity of this review. The views expressed in this review are
those of the authors and do not necessarily represent those of the US Environmental Protection
Agency (US EPA).
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RE15_FrontMatter ARjats.cls August 16, 2023 17:15
Annual Review of
Resource
Economics
Contents Volume 15, 2023

Autobiographical
Sir Partha Dasgupta: Meeting the Challenges of Environmental

and Development Economics
Partha Dasgupta, Gordon C. Rausser, and David Zilberman p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 1
Agricultural Economics
Economics of Crop Residue Management

Vijesh V. Krishna and Maxwell Mkondiwa p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p19
Food Losses in Agrifood Systems: What We Know
Luciana Delgado, Monica Schuster, and Maximo Torero p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p41
Inferential and Behavioral Implications of Measurement Error
in Agricultural Data
Kibrom A. Abay, Tesfamicheal Wossen, Gashaw T. Abate, James R. Stevenson,
Hope Michelson, and Christopher B. Barrett p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p63
Food Fraud: Causes, Consequences, and Deterrence Strategies
Konstantinos Giannakas and Amalia Yiannaka p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p85
Environmental Economics
The Economics of Nutrient Pollution from Agriculture

Gemma Del Rossi, Mohammad Mainul Hoque, Yongjie Ji, and Catherine L. Kling p p p p 105
The Market Stability Reserve in the EU Emissions Trading System:
A Critical Review
Simone Borghesi, Michael Pahle, Grischa Perino, Simon Quemin,
and Maximilian Willner p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 131
Behavioral Economics and Neuroeconomics of Environmental Values
Phoebe Koundouri, Barbara Hammer, Ulrike Kuhl, and Alina Velias p p p p p p p p p p p p p p p p p p p p 153
xiii
Environmental Regulation and Labor Demand: What Does the Evidence

Tell Us?
Wayne B. Gray, Ron Shadbegian, and Ann Wolverton p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 177
Competition Policy and the Environment
Roman Inderst and Stefan Thomas p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 199
The Effects of Temperature on Labor Productivity
Wangyang Lai, Yun Qiu, Qu Tang, Chen Xi, and Peng Zhang p p p p p p p p p p p p p p p p p p p p p p p p p p 213
A Review of the Financial Sector Impacts of Risks Associated
with Climate Change

Fujin Zhou, Thijs Endendijk, and W.J. Wouter Botzen p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 233
Development Economics
Do Different Estimation Methods Lead to Implausible Differences in the

Size of Nonobserved or Shadow Economies? A Preliminary Answer
Friedrich Schneider p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 257
Food Insecurity in the United States: Measurement, Economic Modeling,
and Food Assistance Effectiveness
Travis A. Smith and Christian A. Gregory p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 279
Social Protection and Rural Transformation in Africa
Juan Sebastian Correa, Silvio Daidone, Benjamin Davis, and Nicholas J. Sitko p p p p p p p p 305
Resource Economics
Economics of Ecosystem Restoration

Alisher Mirzabaev and David Wuepper p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 329
Agroecology for a Sustainable Agriculture and Food System: From Local
Solutions to Large-Scale Adoption
Frank Ewert, Roland Baatz, and Robert Finger p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 351
The Role and Use of Mathematical Programming in Agricultural,
Natural Resource, and Climate Change Analysis
Chengcheng J. Fei and Bruce A. McCarl p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 383
Health and Nutrition Economics
A New Wave of Sugar-Sweetened Beverage Taxes: Are They Meeting

Policy Goals and Can We Do Better?
Kristin Kiesel, Hairu Lang, and Richard J. Sexton p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 407
xiv Contents
Heterogeneous Effects of Obesity on Life Expectancy: A Global

Perspective
Sangeeta Bansal and Yanhong Jin p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 433
Advances in Causal Inference at the Intersection of Air Pollution
and Health Outcomes
Dylan Brewer, Daniel Dench, and Laura O. Taylor p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 455
Research and Development

Slow Magic: Agricultural Versus Industrial R&D Lag Models

Julian M. Alston, Philip G. Pardey, Devin Serfas, and Shanchao Wang p p p p p p p p p p p p p p p p p 471
The Rigor Revolution: New Standards of Evidence for Impact

Assessment of International Agricultural Research
James R. Stevenson, Karen Macours, and Douglas Gollin p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p p 495
Errata
An online log of corrections to Annual Review of Resource Economics articles may be
found at http://www.annualreviews.org/errata/resource
Contents xv

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Annual Review of Resource Economics

Environmental Regulation and

Evidence Tell Us?

Wayne B. Gray,1 Ron Shadbegian,2 and Ann Wolverton3

Annu. Rev. Resour. Econ. 2023. 15:177–97 Keywords

The Annual Review of Resource Economics is online at Abstract

178 Gray • Shadbegian • Wolverton

Net employment effects caused by environmental regulation consist of a combination of increases

demand effect, the cost effect, and the factor-shift effect.

www.annualreviews.org • Environmental Regulation and Labor Demand 179

the overall demand for coal.

180 Gray • Shadbegian • Wolverton

3. PARTIAL EQUILIBRIUM STUDIES

www.annualreviews.org • Environmental Regulation and Labor Demand 181

changes in labor demand outside of the regulated sector.

182 Gray • Shadbegian • Wolverton

Greenstone (2002) United States Plant OLS NAAQS nonattainment Negative

www.annualreviews.org • Environmental Regulation and Labor Demand 183

184 Gray • Shadbegian • Wolverton

3.2. Air Quality Impacts on Labor Supply and Productivity

4. GENERAL EQUILIBRIUM EFFECTS ON LABOR MARKETS

14 See Morgenstern et al. (2002) for a description of these three effects.

www.annualreviews.org • Environmental Regulation and Labor Demand 185

4.1. Incorporating Unemployment in CGE Models

186 Gray • Shadbegian • Wolverton

www.annualreviews.org • Environmental Regulation and Labor Demand 187

Because I-O macroeconometric models are reduced-form representations designed to reflect

4.3. Employment Estimates from Economy-Wide Models in the Gray Literature

188 Gray • Shadbegian • Wolverton

Goldberg (2010) MDHDV GHG (P) No No I-O (IMPLAN)

316(b) (P), CCR (P) Yes Yes

Table based on data from US EPA (2016).

www.annualreviews.org • Environmental Regulation and Labor Demand 189

5. FUTURE RESEARCH DIRECTIONS

190 Gray • Shadbegian • Wolverton

www.annualreviews.org • Environmental Regulation and Labor Demand 191

192 Gray • Shadbegian • Wolverton

renewable energy promotion. Energy Econ. 36:277–85

www.annualreviews.org • Environmental Regulation and Labor Demand 193

Rep., MRG Assoc., Nevada City, CA. https://calstart.org/wp-content/uploads/2018/10/National-

194 Gray • Shadbegian • Wolverton

MA/College Park, MD. http://inforumweb.inforumecon.com/papers/otherstudies/2015/iec_

www.annualreviews.org • Environmental Regulation and Labor Demand 195

196 Gray • Shadbegian • Wolverton

www.annualreviews.org • Environmental Regulation and Labor Demand 197

Contents Volume 15, 2023

Sir Partha Dasgupta: Meeting the Challenges of Environmental

Economics of Crop Residue Management

The Economics of Nutrient Pollution from Agriculture

Environmental Regulation and Labor Demand: What Does the Evidence

with Climate Change

Do Different Estimation Methods Lead to Implausible Differences in the

Economics of Ecosystem Restoration

Health and Nutrition Economics

A New Wave of Sugar-Sweetened Beverage Taxes: Are They Meeting

Heterogeneous Effects of Obesity on Life Expectancy: A Global

Research and Development

Slow Magic: Agricultural Versus Industrial R&D Lag Models