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Socioeconomic Disparities in Privatized Pollution Remediation: Evidence from Toxic Chemical Spills
Socioeconomic Disparities in Privatized Pollution Remediation: Evidence from Toxic Chemical Spills
Justin Marion
Jeremy West
American Economic Journal: Applied Economics (Forthcoming)
Abstract
Governments often privatize the administration of regulations to
third-party specialists paid for by the regulated parties. We study
how the resulting conflict of interest can have unintended consequences
for the distributional impacts of regulation. In Massachusetts,
the party responsible for hazardous waste contamination
must hire a licensed contractor to quantify the environmental
severity. We find that contractors’ evaluations favor their
clients, exhibiting substantial score bunching just below thresholds
that determine government oversight of the remediation. Client
favoritism is more pronounced in socioeconomically disadvantaged
neighborhoods and is associated with inferior remediation quality,
highlighting a novel channel for inequities in pollution exposure.
