Research

Working Papers

Adjustment Frictions and the Cost of Environmental Regulatory Uncertainty
Abstract

How do political transitions affect the efficacy of regulatory enforcement? When elected officials appoint regulators, political shifts create regulator turnover and fluctuate enforcement intensity. If adjusting pollution levels is costly, these regulatory swings impose economic burdens. This paper quantifies the welfare costs of regulatory fluctuations in California’s water quality enforcement. Using linked data on enforcement, compliance, and regulator composition, I document that facility violations adjust gradually following regulator turnover, suggesting substantial compliance adjustment costs. I estimate a structural model of facility abatement decisions and find that past pollution levels influence current abatement choices 3.5 times more than current fines. Counterfactual analysis shows that regulatory fluctuations generate welfare losses equal to nearly one-third of total fines, driven by adjustment costs (31%) and political inefficiency (69%). While adjustment costs partially stabilize pollution by dampening responses to regulatory swings, policy uncertainty weakens this effect. Finally, I show that institutional reforms can mitigate these losses: doubling regulator term lengths to eight years reduces welfare losses by 14%.

Work in Progress

Measurement Errors in Weather Data —with Derek Lemoine, Wint Thu

Do Firms Avoid Pollution? Water Pollution and Beverage Manufacturers’ Location