When Regulation Travels: Supply Chain Disruptions and Environmental Spillovers under the Clean Air Act
Under ReviewWe study how place-based environmental regulation affects production networks. Linking establishment locations and emissions with firm-to-firm networks and Clean Air Act nonattainment designations, we distinguish regulatory exposure through a firm's own locations, suppliers, and customers. Supplier-side exposure increases supplier disconnections and customer-side exposure raises customer disconnections; severed links are rarely replaced. We then turn to emissions, the outcome in which adjustment within continuing relationships may appear. Supplier-side exposure is associated with lower emissions while customer-side exposure is associated with higher emissions, even after accounting for turnover. The asymmetry is consistent with customers being the stronger bargaining party, transmitting pressure upstream.