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Abstract:
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This paper shows that changes in a state's regulatory stringency can have significant effects on the manufacturing sector. Using fixed effects OLS regression on state-level data for years 1977-1994, a modest change in the stringency index of 0.18 units, can lead to an expected decline in manufacturing GSP of 1.8 percent. For a state with manufacturing GSP equal to the state average of $30 billion, this is a loss of $540 million. Furthermore through comparisons with random effects models, it appears that unobserved factors may bias coefficient estimates for the regulatory stringency index downward. This is important as future research must be sure that results do not understate the true impact of a state's environmental policies on the manufacturing sector. |