Labor Impacts of the Enforcement of the Clean Water Act

Abstract

This dissertation is the collection of three papers that each examines a specific labor impact of the enforcement of the Clean Water Act. The chapters of the dissertation all use panel data from a unique survey of chemical manufacturing facilities operating between 1999 and 2001 to empirically examine how environmental enforcement policy affects the use of employees at regulated firms, specifically those employees whose job functions pertain to environmental management. The first chapter explores the effects of enforcement on the amount of environmental labor employed by facilities regulated under the U.S. Clean Water Act. Specifically, the analysis examines the influence of monitoring inspections and enforcement actions, e.g., fines, on the number of employees allocated to environmental management. Empirical results show that environmental enforcement negatively affects the amount of environmental labor allocated by the sampled facilities. Specifically, federal inspections, informal enforcement actions, and monetary fines each negatively affect environmental employment. The second chapter adds to the first by examining the influence of the overall environmental enforcement approach, contrasting a potentially innovative cooperative approach with the standard coercive approach, on the effects of government interventions on corporate environmental management, specifically environmental employment. The results show that the effectiveness of enforcement at inducing better environmental management depends on the overall regulatory enforcement approach. Controlling for various facility-level characteristics, I find that greater cooperation undermines enforcement effectiveness. As one example, monetary penalties positively affect the amount of environmental labor under a sufficiently coercive approach, yet negatively under a sufficiently cooperative approach. These results show that a cooperative enforcement approach is ineffective at best and counter-productive at worst, while a coercive approach is generally effective. Rather than cooperation representing an innovative policy, cooperation may simply reflect regulatory capture. The third chapter examines the overall employment effects of environmental enforcement. To generate contributions, the study assesses various forms of enforcement, which include both government monitoring inspections and actual enforcement actions. The study first estimates effects of government interventions on total employment, consistent with previous empirical studies. Then the study jointly estimates a system of two equations – one for environmental labor and one for production labor – to identify the different effects of government interventions on environmental workers and production workers. Overall, the empirical results reveal that government interventions have a zero or negative effect on total employment. More important, the empirical results generally demonstrate that government interventions have a zero or positive effect on environmental employment, yet a zero or negative effect on production employment, consistent with the constructed theoretical framework. Thus, all previous labor studies, which examine only total employment, most likely generate results that support incomplete, if not misleading, conclusions.