Environmental Regulation and U.S. Economic Growth

Abstract

In this article we quantify the costs of pollution controls by reporting the results of simulations of the growth of the U.S. economy with and without regulation. For this purpose, we have constructed a detailed model of the economy that includes the determinants of long-term growth. We have also analyzed the interaction between industries in order to capture the full repercussions of environmental regulations. However, we have not attempted to assess the benefits resulting from a cleaner environment. We find that pollution abatement has emerged as a major claimant on the resources of the U.S. economy. The cost of emission controls is more than 10% of the total cost of government purchases of goods and services.