We consider the relationship between the location choices of potentially
polluting firms and local income. Unlike previous research in the area of
environmental justice, we distinguish between pollution potential and actual
releases of toxic substances in the locality. We explore the relationship between the profit maximizing behavior of potentially polluting firms in their choice of both location and expenditures to influence the likelihood of toxic releases and their expected financial costs. We proxy the expenditures on prudential behavior by observing the co-localization of waste remediation activities. Evidence supports the conclusion that firms behave rationally in managing risk of toxic release, which may result in disparities in exposure to toxic releases faced by certain population groups.
This is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, 136, 2021 DOI: 10.1016/j.euroecorev.2021.103742
