When Regulation Travels: Supply Chain Disruptions and Environmental Responses under the Clean Air Act
In ProgressWe 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, while severed links are rarely replaced. We then turn to emissions, where adjustment within continuing relationships appears. Supplier-side exposure is associated with lower emissions, whereas customer-side exposure leads to higher emissions, even after accounting for network turnover. We provide a simple framework with pollution offloading, input content, and margin compression to explain the asymmetry.