Title: Do stringent environmental regulations cause firm relocations and job loss? A case study of the wood furniture industry in Southern California

Authors: Ward F. Thomas; Paul M. Ong

Addresses: Department of Urban Studies and Planning, California State University, Sierra Hall, 208, 18111 Nordhoff Street, Northridge, CA, 91330, USA ' Lewis Center for Regional Policy Studies, School of Public Policy and Social Research, University of California, 3250 Public Policy Building, Los Angeles, CA, 90095-1656, USA

Abstract: Do stringent environmental regulations cause polluting companies to relocate from a particular region to avoid environmental compliance, resulting in job loss for communities left behind? We investigate this question through a case study of the wood furniture industry in Southern California. Since 1988, the wood furniture industry in the region has been heavily regulated by the South Coast Air Quality Management District (AQMD) due to the emission of volatile organic compounds (VOCs) from coatings applied to furniture. VOCs are a precursor of ozone formation, a major air quality problem facing most urban areas. Using a mix of quantitative and qualitative methods, we found that the regulations caused some firms, particularly larger ones, to relocate after the initial implementation of Rule 1136. However, the industry adjusted to the regulations in the context of other circumstances, including cyclical economic trends, high business costs, the globalisation of the US wood furniture industry, and the emergence of viable low-VOC and water-based coatings. Using a regression model that controls for the business cycle and secular trends, we estimate that job levels in the industry in Southern California are about one-third lower due to AQMD's regulations.

Keywords: environmental policy; economic development; environmental regulations; firm relocation; job loss; case study; wood furniture industry; USA; United States; air pollution; environmental compliance; VOC emissions; volatile organic compounds; furniture coatings; air quality.

DOI: 10.1504/IER.2016.074872

Interdisciplinary Environmental Review, 2016 Vol.17 No.1, pp.20 - 37

Received: 27 May 2014
Accepted: 06 Mar 2015

Published online: 22 Feb 2016 *

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