When Regulation Travels: Supply Chain Disruptions and Environmental Spillovers under the Clean Air Act
Under ReviewWe study how place-based environmental regulation reshapes supply chains and emissions. Using U.S. establishment data combined with firm-to-firm linkages, we exploit quasi-random variation in Clean Air Act nonattainment designations to estimate the effects of direct and indirect regulatory exposure. Establishments facing regulatory shocks via network counterparts sever ties with regulated partners and face barriers to forming new linkages — yet these network adjustments explain little of the observed emission changes. Establishments lower emissions under direct and supplier-side exposures but increase emissions when their customers are regulated, consistent with stronger customer bargaining power shaping environmental responses under indirect regulatory pressure.