Local Environmental Quality and Inter-Jurisdictional Spillovers

Katrina Kosec, International Food Policy Research Institute (IFPRI)
John Hatfield, Stanford University

We empirically investigate how the provision of a local publicly-provided good--air quality--varies with the degree of spillovers between jurisdictions. Exploiting exogenous variation in the natural topography of the U.S. to instrument for the number of local government jurisdictions in a metropolitan area, we show that areas with more jurisdictions have significantly lower air quality. An increase in the number of jurisdictions also leads to increased concentrations of the measured toxic air pollutants most closely associated with cancer and non-cancer health risks. By contrast, local drinking water quality--a local publicly-provided good not subject to spillovers--does not systematically vary with the number of jurisdictions. Finally, we show that differences in air quality seem to be largely driven by differences in industrial activity: areas with more jurisdictions have significantly higher employment in industries that emit the types of pollutants that compromise air quality.