Friday 10 May 2024 12:00 - 13:30

SAL 1.04, 1st Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

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.

Participants are expected to adhere to the CEP Events Code of Conduct.

Directions

This event will take place in SAL 1.04, 1st Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.

This series is part of the CEP's Labour Markets programme.