Employment and environmental protection: The role of regulatory stringency.

This study examines the link from the stringency of environmental regulation to facility level employment. Much of the literature examining the effects of regulation on employment finds no significant links. However, this literature fails to distinguish between production labor and environmental labor. Our study contributes to this literature by (1) distinguishing workers based on their purpose, jointly estimating these separate outcomes (while controlling for facility heterogeneity), and using cross-equation tests to assess the need for separation, (2) theoretically identifying causal mechanisms linking environmental regulation to employment, and (3) examining the effects of the enforcement of environmental regulation, rather than its imposition, while exploring the heterogeneity of effects by specific enforcement tool. Empirical results reveal that greater enforcement of environmental regulation reduces both production employment and environmental employment. Despite this commonality, cross-equation tests reveal that environmental enforcement differentially affects production and environmental employment, implying that the estimation of overall employment appears misspecified. • The relationship between environmental regulation and employment is ambiguous, as prior work does not consider employee type. • Our study distinguishes workers by type and estimates the effects of environmental enforcement on employment. • We identify a causal mechanism for the effects of environmental regulation on employment: a reduction in production. • More stringent environmental regulation results in a decrease in both environmental and production employees. [ABSTRACT FROM AUTHOR]