Pollution abatement and environmental equity: A dynamic study

We study pollution abatement and environmental equity in a dynamic panel model using data for 234 plants in the US pulp and paper industry observed over the period 1985–1997. We suggest a theoretical model for the plant manager who incorporates regulatory pressure into his calculations of optimal amounts of pollution. Assuming actual pollution abatement exhibits a sluggish adjustment process, the theoretical model leads to an empirical AR(1) panel model. We estimate our model using GMM with both “temporally lagged” and “spatially lagged” instruments and find significant evidence supporting the partial adjustment model for both particulate matters less than 10 μm and sulfur dioxide. We find some environmental inequity with respect to the children (under 6 years) and adults with no high school diploma. Our findings show no evidence of environmental inequity against African–Americans, Hispanics, other minority races, or the poor.