CES-WP-03-19
Establishment and Employment Dynamics in Appalachia: Evidence from the Longitudinal Business Database
Lucia Foster
December 01, 2003
One indicator of the general economic health of a region is the rate at which new
jobs are created. The newly developed Longitudinal Business Database has been used in
this paper to develop a detailed portrait of establishment formation and attrition and job
creation and destruction in the Appalachian Region. The foremost finding is that the pace of
reallocation in Appalachia is lower than it is for the U.S.. This is evident in Appalachia’s
relatively lower establishment birth and death rates and job creation and destruction rates.
For example, on average over the study time period, the U.S. job creation rate exceeds 45
percent, while the Appalachian job creation rate is 43 percent. Similarly, the U.S. job
destruction rate is about 35 percent, while the Appalachian job destruction rate is about 33
percent. Even when controlling for other differences, job creation rates are 1.2 percentage
points lower and job destruction rates are 3.4 percentage points lower in Appalachia relative
to the rest of the U.S. Another indicator of the general economic health of a region is the
quality of its jobs. The quality of jobs is measured in this paper by the average wage paid at
the establishment. Here too there is cause for concern about the economic health of
Appalachia. The analysis shows that wages are about 10 percent lower in Appalachia than
in the U.S. even when controlling for differences in other characteristics across the two
areas. This wage discrepancy has not narrowed over the time of the study. Moreover, new
establishments have a similar wage gap. Employees at new establishments earn wages 10
percent less than at new establishments in the rest of the U.S.
View Paper 51 Pages 132768 Bytes
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CES-WP-03-18
Pollution Abatement Expenditure by U.S. Manufacturing Plants: Do Community Characteristics Matter?
Randy Becker
November 01, 2003
A number of previous studies have demonstrated the impact of community characteristics on environmental outcomes such as local pollution levels and the siting of noxious facilities. If certain groups are indeed exposed to higher levels of air pollution, it may be due to a greater concentration of air polluters in those communities and/or facilities in those areas investing less in air pollution abatement. This paper examines the latter, using establishment-level data on manufacturing plants from the U.S. Census Bureau’s Pollution Abatement Costs and Expenditures (PACE) survey. The empirical formulation herein allows plant-level air pollution abatement operating costs to depend on an array of community characteristics common to this literature. After controlling for establishment characteristics and federal, state, and local regulation, some of these local factors are found to have had an additional effect on air pollution abatement expenditures. In particular, populations with higher homeownership rates and higher per capita income enjoyed greater pollution abatement activity from their nearby plants. Meanwhile, establishments in communities where manufacturing accounted for a greater share of local employment had less pollution abatement spending, suggesting a local constituency that is more resistant to additional regulation. Political ideology is also found to play a role, with plants in areas with larger concentrations of Democrats having more expenditure on air pollution abatement, all else being equal. There is little evidence that race and ethnicity matter when it comes to the pollution abatement behavior of the most pollution-intensive facilities. The findings of this paper support those of a number of recent studies.
View Paper 24 Pages 373574 Bytes
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CES-WP-03-17
Do Tax Incentives Affect Local Economic Growth? What Mean Impacts Miss in the Analysis of Enterprise Zone Policies
Daniele Bondonio
September 01, 2003
Geographically-targeted tax incentives remain popular initiatives in response to deteriorating economic
conditions of urban and industrial areas. This paper exploits the exogenous variations of the U.S. state
Enterprise Zone programs to estimate the impact of various incentive features on a number of dimensions of
local economic growth. The econometric analysis uses plant level data to sort out growth outcomes into gross
flows separately accounted for by new, existing, and vanishing businesses in the target areas. Results offer
empirical evidence to support a number of specific policy recommendations and show that the impact of the
incentives has more complex dynamics than those revealed by the null mean impact estimates obtained from
analyzing net growth outcomes.
View Paper 36 Pages 306129 Bytes
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CES-WP-03-16
Pollution Abatement Expenditures and Plant-Level Productivity: A Production Function Approach
Ronald Shadbegian, Wayne Gray
August 01, 2003
In this paper, we investigate the impact of environmental regulation on productivity using
a Cobb-Douglas production function framework. Estimating the effects of regulation on
productivity can be done with a top-down approach using data for broad sectors of the
economy, or a more disaggregated bottom-up approach. Our study follows a bottom-up
approach using data from the U.S. paper, steel, and oil industries. We measure
environmental regulation using plant-level information on pollution abatement
expenditures, which allows us to distinguish between productive and abatement
expenditures on each input. We use annual Census Bureau information (1979-1990) on
output, labor, capital, and material inputs, and pollution abatement operating costs and
capital expenditures for 68 pulp and paper mills, 55 oil refineries, and 27 steel mills.
We find that pollution abatement inputs generally contribute little or nothing to output,
especially when compared to their ‘productive’ equivalents. Adding an aggregate
pollution abatement cost measure to a Cobb-Douglas production function, we find that a
$1 increase in pollution abatement costs leads to an estimated productivity decline of
$3.11, $1.80, and $5.98 in the paper, oil, and steel industries respectively. These findings
imply substantial differences across industries in their sensitivity to pollution abatement
costs, arguing for a bottom-up approach that can capture these differences. Further
differentiating plants by their production technology, we find substantial differences in
the impact of pollution abatement costs even within industries, with higher marginal
costs at plants with more polluting technologies. Finally, in all three industries, plants
concentrating on change-in-production-process abatement techniques have higher
productivity than plants doing predominantly end-of-line abatement, but also seem to be
more affected by pollution abatement operating costs. Overall, our results point to the
importance using detailed, disaggregated analyses, even below the industry level, when
trying to model the costs of forcing plants to reduce their emissions.
View Paper 30 Pages 226294 Bytes
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CES-WP-03-15
Regional Income Inequality and International Trade
Julie Silva, Robin Leichenko
July 01, 2003
International trade is frequently cited as a cause of rising income inequality
between individuals and across countries. Less attention has been paid to the effects of
trade on inequality across regions within countries. Trade may enhance regional
inequalities due to differences in regional trade involvement and in the prices of export
and import-competing goods produced in different regions. This study investigates the
effects of trade on income inequality across regions in the United States. Using both
structural and price-based measures of regional trade involvement, we evaluate the
effects of trade on inequality within and across states, the metro and nonmetro portions of
the states, and the major Census regions. Across all states and across metro and nonmetro
areas, we find that trade affects inequality primarily via import and export prices. In
contrast to our expectations, however, a weaker dollar —more expensive imports and
cheaper exports — is associated with a worsening of a state’s position relative to other
states, and greater inequality within a state. Across the Census regions, both our price and
measures had significant effects, but the direction of these effects varied by region.
Whereas most regions benefited from cheaper imports, states located in regions that are
traditionally home to low-wage sectors, including the Southeast and South Central
regions, were made relatively worse off by lower import prices and by greater orientation
toward import-competing goods. Our findings reinforce notions about the uneven impacts
of globalization and suggest that policy measures are needed to ensure that both the
benefits and costs of international trade involvement are shared across regions.
View Paper 54 Pages 567203 Bytes
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CES-WP-03-14
Manufacturing Firms' Decisions Regarding Retiree Health Insurance
Patricia Born, Alice Zawacki
June 01, 2003
This study analyzes the firm’s decision to offer and contribute to retiree health
insurance. We apply a binomial probit model and an interval regression model to analyze
the likelihood of offering and the proportion of costs contributed by the firm. Our
findings indicate that while firm characteristics affect the probability that a firm offers
retiree health insurance, financial performance and alternative insurance options
significantly affect the firm’s generosity towards its cost. This study expands on previous
research by including potentially important policy-related measures to the more limited
set of firm and workforce characteristics that have been typically employed.
View Paper 44 Pages 240645 Bytes
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CES-WP-03-13
Specialization, Firms, and Markets: The Division of Labor Within and Between Law Firms
Luis Garicano, Thomas Hubbard
May 01, 2003
What is the role of firms and markets in mediating the division of labor? This
paper uses confidential microdata from the Census of Services to examine law
firms' boundaries. We find that firms� field scope narrows as market size
increases and individuals specialize, indicating that firms� boundaries reflect
organizational trade-offs. Moreover, we find that whether the division of labor is
mediated by firms differs systematically according to whether lawyers in a
particular field are mainly involved in structuring transactions or in dispute
resolution. Our evidence is consistent with hypotheses in which firms� boundaries
reflect variation in the value of knowledge-sharing or in the costs of monitoring,
but not in risk-sharing. Our findings show how the incentive trade-offs associated
with exploiting increasing returns from specialization help lead the structure of
the industry to be fragmented, but highly-skewed.
View Paper 54 Pages 473822 Bytes
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CES-WP-03-12
International Trade, Employment, and Earnings: Evidence from U.S. Rural Counties
Robin Leichenko, Julie Silva
May 01, 2003
Rural manufacturers in the United States are considered highly vulnerable to competition
from international imports. Yet only limited empirical attention has been paid to the
effects of trade on U.S. rural economies. This paper investigates the effects of
international trade on U.S. rural manufacturing economies and compares the effects of
trade pressures in rural versus urban areas. Our results indicate that lower export prices
are associated with increased manufacturing employment and earnings in both rural and
urban counties, while lower import prices are associated with reduced rural employment
but increased urban employment. Greater export orientation is associated with lower
employment and earnings in both rural and urban counties, while import orientation has
mixed effects.
View Paper 46 Pages 216700 Bytes
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CES-WP-03-11
How Workers Fare When Employers Innovate
Sandra Black, Lisa Lynch, Anya Krivelyova
May 01, 2003
Complementing existing work on firm organizational structure and productivity, this paper examines the impact of organizational change on workers. We find evidence that employers do appear to compensate at least some of their workers for engaging in high performance workplace practices. We also find a significant association between high performance workplace practices and increased wage inequality. Finally, we examine the relationship between organizational structure and employment changes and find that some practices, such as self-managed teams, are associated with greater employment reductions, while other practices, such as the percentage of workers involved in job rotation, are associated with lower employment reductions.
View Paper 38 Pages 187633 Bytes
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CES-WP-03-10
What Determines Environmental Performance at Paper Mills? The Roles of Abatement Spending, Regulation, and Efficiency
Ronald Shadbegian, Wayne Gray
April 01, 2003
This paper examines the determinants of environmental performance at paper mills, measured by air
pollution emissions per unit of output. We consider differences across plants in air pollution abatement
expenditures, local regulatory stringency, and productive efficiency. Emissions are significantly lower in
plants with a larger air pollution abatement capital stock: a 10 percent increase in abatement capital stock
appears to reduce emissions by 6.9 percent. This translates into a sizable social return: one dollar of
abatement capital stock is estimated to provide and annual return of about 75 cents in pollution reduction
benefits. Local regulatory stringency and productive efficiency also matter: plants in non-attainment
counties have 43 percent lower emissions and plants with 10 percent higher productivity have 2.5 percent
lower emissions. For pollution abatement operating costs we find (puzzlingly) positive, but always
insignificant, coefficients.
View Paper 34 Pages 232983 Bytes
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