The Long Shadow of Industrial Pollution: Environmental Amenities and the Distribution of Skills
AbstractThis paper presents theory and evidence on the role of environmental amenities in shaping
the competitiveness of post-industrial cities. I assemble a rich database at a fine spatial resolution to
examine the impact of historical pollution on the distribution of skilled workers and residents within
American cities today.
I find that census tracts downwind of highly polluted 1970s industrial sites were associated with higher
pollution levels in the 1970s but not after 2000. However, they were less skilled and had lower wage
and housing values in 2000, a pattern which became more prominent between 1980 and 2000. These
findings suggest the presence of skill sorting on pollution and strong subsequent agglomeration effects.
To quantify the contribution of different mechanisms, I build and estimate a multi-sector spatial
equilibrium framework that introduces heterogeneity in local productivity and workers' valuation for
local amenities across sectors, and allows initial sorting to be magnified by production and residential
externalities. Estimation of the model suggests that historical pollution is associated with lower
current productivity and amenity levels. The effects are more pronounced for productivity, more
skilled sectors and central tracts. I use the framework to evaluate the impact of counterfactual
pollution cuts in different parts of cities on nationwide welfare and the cross-city distribution of skills.