Abstract
Our study examines a case where cross-border air pollution had not been effectively dealt with by a decentralized, state level policymaking, letting a coal-fired power plant located on the border between two states pollute the downwind state for years without being controlled. We find that the shutdown of the power plant, thanks to a landmark ruling by the federal government, reduces the likelihoods of having a low birth weight baby and having a preterm birth by 15 percent and 28 percent, respectively, in areas downwind of the power plant. The ruling marks the first-ever federal level regulation under the Clean Air Act that overrides state-level regulations and is directly imposed upon a single pollution source. Our empirical setting emphasizes the importance of such regulation in curbing environmental free riding induced by jurisdictional borders, where pollution cost-shifting can be aided by natural forces such as prevailing winds.
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