Firm reallocation as environment policy: Impact on agglomeration, workers and the environment

The trade-offs between promoting economic growth while minimizing externalities such as pollution, are among the key dilemmas facing policymakers. Understanding the economic and distributional consequences of policies that seek to reduce air pollution by impacting firms, is important to inform policies that balance this trade-off. Furthermore, since many of these policies impact firm decisions, they also provide a lens to test theories of firm interactions that contribute to our understanding of firm behaviour. This seminar presents evidence from a project using quasi-experimental methods to evaluate the impacts of industrial relocation policies in several Indian cities which mandated the closure of certain industries (classified as “polluting industries”) to certain designated areas. They are evaluated on outcomes such as firm location, pollution agglomeration, and residential expansion.