They conclude that nothing has changed since 1975. Effects of Clean Water Act Grants on Water Pollution: Event Study Graphs. The year in these data refers to each local governments fiscal year. The Author(s) 2018. We report both the double-difference and triple-difference estimators for both outcomes, and obtain qualitatively similar conclusions. Municipal spending data from Annual Survey of Governments and Census of Governments. The health of many aquatic species (so indirectly, the benefit people derive from a river) may depend nonlinearly on the area of clean water. Asterisks denote p-value < .10 (*), < .05 (**), or < .01 (***). The Clean Water Act and Water Pollution, VI. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. Asterisks denote p-value < .10 (*), < .05 (**). Event study graphs corresponding to equation (4) support these results. We discuss a range of pass-through estimates including these for cost-effectiveness and cost-benefit analysis. Standard errors are clustered by watershed. We recognize the potential importance of nonuse values for clean surface waters and the severe challenges in accurately measuring these values.26 Other categories potentially not measured here include the value for commercial fisheries, industrial water supplies, lower treatment costs for drinking water, and safer drinking water.27 Evidence on the existence and magnitude of the benefits from these other channels is limited, though as mentioned already, recreation and aesthetics are believed to account for a large majority of the benefits of clean surface waters. Another is that fishable and swimmable are limited between 0 and 1, and dissolved oxygen saturation does not much exceed 100%. Another test comes from the fact that the 19802000 gross rent data reported in the census include utilities costs. As in most event study analyses, only a subset of event study indicators are observed for all grants. 2001; Steinwender, Gundacker, and Wittmann 2008; Artell, Ahtiainen, and Pouta 2013). \end{equation}, \begin{equation*} We impute these values from a panel regression of log mean home values on year fixed effects and tract fixed effects. Grant project costs include federal grant amount and required local capital expenditure. 1251 et seq. TableII shows that these grants cause large and statistically significant decreases in pollution. The Clean Water Act of 1977 was an important and controversial environmental regulation the United States Congress had passed. If approved, it will protect clean drinking water, upgrade water infrastructure, preserve open space and family farms, fight climate change, and keep communities safe from extreme weather,. We assume that housing markets are competitive and that each consumer rents one house. This extra subsidy fell to 75% in 1984, and about 8% of projects received the subsidy for innovative technology (U.S. Government Accountability Office 1994). Notes. Panel A estimates pass-through modestly above 1 since it excludes the required municipal copayment. Row 8 equals row 1 divided by 30 times row 6. GLS based on the number of underlying pollution readings in each plant downstream year is an efficient response to heteroskedasticity since we have grouped data. Our interpretation is that once the Clean Water Act began, cities became less likely to spend municipal funds on wastewater treatment capital. In total over the period 19722001, the share of waters that are not fishable and the share not swimmable fell by 11 to 12 percentage points. Foremost is the requirement in section 303 that states establish ambient water quality standards for water bodies, consisting of the designated use or uses of a Moreover, the share of industrial water discharge that was treated by some abatement technology grew substantially in the 1960s (U.S. Census Bureau 1971). We also report unweighted estimates. For full access to this pdf, sign in to an existing account, or purchase an annual subscription. Notes. 679 Words. Part I: State Pollution Control Programs, The Role of Water Quality Perceptions in Modelling Lake Recreation Demand, The International Handbook on Non-Market Environmental Valuation, The Displacement of Local Spending for Pollution Control by Federal Construction Grants, American Economic Review Papers and Proceedings, Water Pollution Progress at Borders: The Role of Changes in Chinas Political Promotion Incentives, American Economic Journal: Economic Policy, The Missing Benefits of Clean Water and the Role of Mismeasured Pollution Data, The Low but Uncertain Measured Benefits of US Water Quality Policy, Proceedings of the National Academy of Sciences, Replication Data for Consequences of the Clean Water Act and the Demand for Water Quality, Evaluating Public Programs with Close Substitutes: The Case of Head Start. Row 5 is calculated by multiplying each grant by the parameter estimate in Online Appendix TableVI, row 13, column (2), and applying the result to all waters within 25 miles downstream of the treatment plant. Annual cost to make a river-mile fishable, 8. Panel A shows modest evidence that in the years after a plant receives a grant, the values of homes within 0.25 mile of the downstream river increase. Two are marginally significant (Panel C, column (1)), though the precision and point estimate diminish with the controls of column (2). We find suggestive evidence that ratios of measured benefits to costs follow sensible patterns, though not all estimates are precise. Standard errors are clustered by watershed. Some of the pernicious substances that have been found in water supply systems across the United States include: Arsenic (declared safe for drinking water by the government at twice the levels recommended by private scientists) Uranium Mercury Lead Manganese Perchlorate - a rocket fuel additive Trichloroethylene - a degreaser used in manufacturing Other possible general equilibrium channels describe reasons the effects of cleaning up an entire river system could differ from summing up the effects of site-specific cleanups. The Clean Water Act, by contrast, mostly ignores nonpoint pollution sources like agriculture. The offer function is the firms isoprofit curve in the trade-off between home price and attribute j. For this reason, our preferred methodology in Section IV.B to assess how Clean Water Act grants affect water pollution uses a triple-difference estimator comparing upstream and downstream areas. Most others are statistically indistinguishable from the mean grant, though there is some moderate (if statistically insignificant) heterogeneity in point estimates. First, this is the average cost to supply water quality via Clean Water Act grants; the marginal cost, or the cost for a specific river, may differ. This explanation is less relevant for the slowing trends in continuous variables like BOD, fecal coliforms, or TSS. These confidence regions do not reject the hypothesis that the ratio of the change in home values to the grants costs is zero but do reject the hypothesis that the change in home values equals the grants costs. \end{equation}, \begin{equation} First, the analysis is based on only 198 cities. We calculate the present value of rental payouts as |$rentalPayout\frac{1-(1+r)^{-n}}{r}$|, where rentalPayout is the change in total annual rents due to the grants, r = 0.0785 is the interest rate, and n = 30 is the duration of the benefits in years. Online Appendix TableVII investigates heterogeneity in measured benefits and costs; Online Appendix E.3 discusses the results. Our topic is clean water and sanitation. Hines (1967) describes state and local control of water pollution in the 1960s, which typically included legislation designating regulated waters and water quality standards, a state pollution control board, and enforcement powers against polluters including fines and incarceration. Our estimates are consistent with no crowding out for an individual grant, but the existence of the Clean Water Act may decrease aggregate municipal investment in wastewater treatment. The other pollutants decrease as wellBOD falls by about 2.4%, fecal coliforms fall by 3.6%, and the probability that downstream waters are not swimmable by about half a percentage point. International Spillovers and Water Quality in Rivers: Do Countries Free Ride? saturation increase/10, 7. \end{equation*}. N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; N3 - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and, N4 - Government, War, Law, International Relations, and, N5 - Agriculture, Natural Resources, Environment, and Extractive, N7 - Transport, Trade, Energy, Technology, and Other, O - Economic Development, Innovation, Technological Change, and, O3 - Innovation; Research and Development; Technological Change; Intellectual Property, Q - Agricultural and Natural Resource Economics; Environmental and Ecological, R - Urban, Rural, Regional, Real Estate, and Transportation, R3 - Real Estate Markets, Spatial Production Analysis, and Firm, Z1 - Cultural Economics; Economic Sociology; Economic, II. Online Appendix F discusses other reasons we believe have weaker support. First is the choice of policy instrument. The tablet dissolves into the liquid and releases some of the chemicals to purify the water instantly. These estimates are within a standard deviation of one, so fail to reject the hypothesis that the municipal wastewater investment exactly equals the cost listed in the grant project data.20. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. The gradual effect of the grants is unsurprising since, as mentioned earlier, the EPA estimates that it took 2 to 10 years after a grant was received for construction to finish. Nutrients were not targeted in the original Clean Water Act but are a focus of current regulation. Pass-through of Grants to Municipal Sewerage Capital Spending. The Clean Water Act targets industry by focusing on the chemical aspects of polluted water. Sample size in all regressions is 6,336. These pass-through estimates also speak to the broader flypaper literature in public finance, so named to reflect its finding that federal government spending sticks where it hits. Researchers have estimated the pass-through of federal grants to local expenditure in education, social assistance, and other public services. Column (4) includes imputed home values for the nonmetro areas that were not in the 1970 or 1980 census.24, Clean Water Act Grants: Costs and Effects on Home Values (|${\$}$|2014B|$\mathrm n$|). When we fit the change in home values, we do so both for only the balanced panel of tract-years reporting home values, and for all tract-years. Research does find statistically significant but imperfect correlation between perceived local water pollution and objectively measured local water pollution (Faulkner etal. Standard errors are clustered by watershed. Another possible channel involves ecology. We find similar trends for the pollutant they study in lakes, though we show that other pollutants are declining in lakes and that most pollutants are declining in other types of waters. The usage of water ranges from basic household needs to agricultural purposes. We convert the data to calendar years using data from these surveys on the month when each governments fiscal year ends, assuming that government expenditure is evenly distributed across months. Our estimated ratio of the change in housing costs to total grant costs may provide a lower bound on the true benefit/cost ratio of this grant program because we abstract from nonuse (existence) values, general equilibrium effects, potential changes in sewer fees, and the roughly 5% longest recreational trips. This predictable spatial variation in the net benefits of water quality variation suggests that allowing the stringency of regulation to vary over space may give it greater net benefits (Muller and Mendelsohn 2009; Fowlie and Muller forthcoming). A second general equilibrium channel is that the hedonic price function may have shifted. Row 12 of Online Appendix TableVIII reports this specification and finds similar and if anything slightly less positive change in home values than the main results estimate, which is the opposite of what one would expect if city taxes, sewer fees, or other local costs depressed home values. *The Clean Water Program, which calls for $790 million for municipal-treatment improvements, nonpoint-source-control projects, aquatic-habitat restoration and implementation of management plans. Each grant decreases dissolved oxygen deficits by 0.7 percentage points, and decreases the probability that downstream waters are not fishable by 0.7 percentage points. Muehlenbachs, Spiller, and Timmins (2015) relate fracking to home values and drinking water. Online Appendix FigureV shows the effect of a grant by distance downstream from a treatment plant; few data are available to estimate effects separately for each five-mile bin along the river, and estimates are correspondingly less precise. V_{py}=\gamma G_{py}+X_{py}^{^{\,\,\prime }}\beta +\eta _{p}+\eta _{wy}+\epsilon _{py}. Second, because the difference-in-differences specification used for home values does not use upstream areas as a counterfactual, it involves the stronger identifying assumption that areas with more and fewer grants would have had similar home price trends in the absence of the grants. We also discuss trends in three other groups of water quality measures: industrial pollutants, nutrients, and general measures of water quality (Online Appendix TableIV).18 All three industrial pollutants have declined rapidly. Connected dots show yearly values, dashed lines show 95% confidence interval. The largest ratios of estimated benefits to costs are for areas where outdoor fishing or swimming is common (ratio of 0.53), for high-amenity urban areas (ratio of 0.40), and in the South (ratio of 0.84). This chart shows the health benefits of the Clean Air Act programs that reduce levels of fine particles and . Smith and Wolloh (2012) study one measure of pollution (dissolved oxygen) in lakes beginning after the Clean Water Act and use data from one of the repositories we analyze. Shapiro thanks fellowships from the EPA, MIT-BP, Martin Family Fellows, the Schultz Fund, the Yale Program on Applied Policy, and NSF Grant SES-1530494 for generous support. Flint potentially could have prevented these problems by adding corrosion inhibitors (like orthophosphate), which are used in many cities (including the Detroit water) that Flint previously used, at low cost. The last 5% of trips might account for disproportionate surplus because they represent people willing to travel great distances for recreation. We deflate operating and maintenance costs and rents at a rate of 7.85% (Peiser and Smith 1985).23, Column (1) of TableVI includes only owned homes within a 1-mile radius of the downstream river segments; column (2) includes homes within a 25-mile radius; and column (3) adds rental units. Event study graphs for other pollutants are consistent with these results, but are less precise (Online Appendix FigureIV). Fourth, this analysis abstracts from general equilibrium changes. Dependent variable mean describes mean in 19621972. \end{align}, To estimate the pass-through of Clean Water Act grants to local expenditure, we regress cumulative municipal sewerage capital expenditures, \begin{equation} Online Appendix E.2 investigates heterogeneity in grants effects on water pollution and cost-effectiveness. These regressions are described in equation (4) from the text. Grant costs include local and federal capital expenditures plus operating and maintenance costs over the 30-year life span for which we estimate grants affect water pollution. The curve 2 describes the bid function for another type of consumer. Official websites use .gov C1 - Econometric and Statistical Methods and Methodology: C3 - Multiple or Simultaneous Equation Models; Multiple, C4 - Econometric and Statistical Methods: Special, C6 - Mathematical Methods; Programming Models; Mathematical and Simulation, C8 - Data Collection and Data Estimation Methodology; Computer, E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal, E5 - Monetary Policy, Central Banking, and the Supply of Money and, E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General, F2 - International Factor Movements and International, F4 - Macroeconomic Aspects of International Trade and, F5 - International Relations, National Security, and International Political, H3 - Fiscal Policies and Behavior of Economic, H5 - National Government Expenditures and Related, H7 - State and Local Government; Intergovernmental, J5 - Labor-Management Relations, Trade Unions, and Collective, J6 - Mobility, Unemployment, Vacancies, and Immigrant, K4 - Legal Procedure, the Legal System, and Illegal, L1 - Market Structure, Firm Strategy, and Market, L7 - Industry Studies: Primary Products and, L9 - Industry Studies: Transportation and, M - Business Administration and Business Economics; Marketing; Accounting; Personnel. 1974 Report to the Congress. ) is that it reflects the equilibrium of firms that supply housing and consumers that demand housing. Estimates appear in Online Appendix TableVIII and discussion appears in Online Appendix E.3. A few notes are important for interpreting these statistics. Dissolved oxygen deficit equals 100 minus dissolved oxygen saturation, measured in percentage points. Other sources note that these time series trends are consistent with aggregate crowding out (Jondrow and Levy 1984; CBO 1985). Connected dots show yearly values, dashed lines show 95% confidence interval, and 1962 is the reference category. Provide federal assistance to control municipal discharges of wastewater. In the presence of such rents, this analysis could be interpreted as a cost-effectiveness analysis from the governments perspective. Choosing Environmental Policy: Comparing Instruments and Outcomes in the United States and Europe, Contingent Valuation: From Dubious to Hopeless, Nor Any Drop to Drink: Public Regulation of Water Quality. We considered a fourth repository, the Sustaining the Earths Watersheds: Agricultural Research Data System (STEWARDS), managed by the USDA. Lack civil or criminal penalties for violations. Fifth, the 25-mile radius is only designed to capture 95% of recreational trips. We interpret pre-1972 trends cautiously, however, because far fewer monitoring sites recorded data before the 1970s (Online Appendix TableI) and because the higher-quality monitoring networks (NAWQA, NASQAN, and HBN) focused their data collection after 1972. Third, if some grant expenditures were lost to rents (e.g., corruption), then those expenditures represent transfers and not true economic costs. \end{equation}. Online Appendix FigureVI shows national trends in federal versus state and local spending on wastewater treatment capital over 19601983.21 State and local spending on wastewater treatment capital declined steadily from a total of |${\$}$|43 billion in 1963 to |${\$}$|22 billion in 1971 and then to |${\$}$|7 billion annually by the late 1970s. Column (1) reports a basic difference-in-differences regression with nominal dollars. The definition also includes standards for boating and drinking water that we do not analyze. Secure .gov websites use HTTPS It may be useful to highlight differences in how the Clean Air and Clean Water Acts answer four important questions about environmental regulation. The change in the value of housing is estimated by combining the regression estimates of TableV with the baseline value of housing and rents from the census. We use the following regression to estimate the effects of Clean Water Act grants on water pollution: \begin{equation} The 1972 U.S. Clean Water Act sought "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." This article quantifies changes in water pollution since before 1972, studies the causes of any changes, and analyzes the welfare consequences of any changes. Online Appendix E.2 discusses how cost-effectiveness numbers change with alternative estimates of crowding out.22. But Supreme Court decisions in 2001 and 2006 threw protections into question for 60 percent of our nation's streams and millions of acres of wetlands. The only econometric analysis we know of such policies tests how the French policy of jointly taxing industrial air pollution and subsidizing abatement technologies affected emissions, using data from 226 plants (Millock and Nauges 2006). These full data show more rapid declines before 1972 than after it. Graphs show coefficients on downstream times year-since-grant indicators from regressions which correspond to the specification of TableII. Column (3) adds river basin year fixed effects. Even without the hedonic estimates of the next section, one can combine cost-effectiveness numbers with estimates from other studies of the value of clean waters to obtain a cost-benefit analysis of these grants.

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