Grandfather Regulations, New Source Bias, and State Air Toxics Regulations

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    Abstract

    This paper uses plant-level data from the Census of Manufactures and the variation in toxic air pollution regulations across states to measure the effects of laws that are more stringent for new sources of pollution than for existing sources (so-called "grandfather" regulations). Of particular interest is the resulting "new source bias" and its effects on capital vintage and investment. Two industries are examined: commercial printing, which has a local product market; and paint manufacturing, which has a more national market. In general, there seem to be no statistically significant differences in capital vintage or investment between plants in states that grandfather new sources of pollution, plants in states that have no air toxics regulations, and plants in states that regulate both new and existing sources.


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