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CEP/STICERD Applications Seminars

Firm Presence, Pollution, and Agglomeration: Evidence from a Randomized Environmental Place-Based Policy

Namrata Kala (Massachusetts Institute of Technology)

Friday 10 May 2024 12:00 - 13:30

Many of our seminars and public events this year will continue as in person or as hybrid (online and in person) events. Please check our website listings and Twitter feed @STICERD_LSE for updates.

Unless otherwise specified, in-person seminars are open to the public.

Those unable to join the seminars in-person are welcome to participate via zoom if the event is hybrid.


About this event

Firm location decisions are a key managerial decision, optimizing factors such as proximity to customers or labor. These decisions also have externalities on other firms due to competitive or agglomerative forces, and on the environment. The inherent endogeneity of these decisions renders estimating the impact of firm presence difficult. In this paper, we study an environmental place-based policy that randomly moved over 20,000 small firms operating in New Delhi to industrial areas outside the city over several years. We find that a reduction in firm presence improves air quality but is costly for firms: relocated firms have a high rate of exit, which increases in the distance relocated. Modeling firms as playing a static game of incomplete information in each industrial area neighborhood, we find the exit effect of relocation could have been mitigated by 45% by allocating firms to plots in the industrial area optimally, taking into account their spillovers on neighboring firms. These results provide causal evidence on the trade-offs between firm presence and environmental quality, and show that firm spillovers can be a useful force to minimize these costs on regulated firms.

Applications (Applied Micro) Seminars are held on Mondays in term time at 12:00-13:30 in SAL 3.05 in person.

Seminar organiser: Katie Smith

For further information please contact Sadia Ali: s.ali43@lse.ac.uk.

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