The Clean Air Act Amendments and Firm Investment in Pollution Abatement Equipment
at the Andrew Young School of Policy Studies

"The Clean Air Act Amendments and Firm Investment in Pollution Abatement Equipment" (pdf)

by James Alm and Amanda I. Lee
November 2003

Keywords: environmental regulation, firm behavior, pollution abatement, command and control

The command-and-control approach to environmental regulation requires that firms install prescribed technologies to meet specified goals. However, environmental regulations change frequently; in addition, the enforcement agency cannot perfectly monitor firm compliance. We examine the impact of uncertainties surrounding the enactment and the enforcement of the Clean Air Act Amendments of 1990 on firm investment in air pollution abatement equipment. We find that our measures of the likelihood of CAAA passage clearly affect a firm’s investment in pollution equipment. Enforcement actions also affect a firm’s investment, but these effects are weaker and are statistically significant only after enactment.

Comments and questions regarding this paper may be directed to James Alm at jalm@gsu.edu.