Redistribution, Delegation, and Regulators’ Incentives : Evidence from the Clean Air Act

Taking advantage of the structure of the 1990 Clean Air Act Amendments (CAAA), we study the tradeoff between efficiency and equity associated with different levels of discretionary power when delegating regulatory authority to lower levels of government. Exploiting an instrumental variables approach, we provide evidence that the benefits of the 1990 CAAA were highly localized and accrued disproportionately to poorer households. Further, under the current structure of the 1990 CAAA, it costs at most about $1.30 for every $1 worth of air quality improvements transferred from richer to poorer areas, suggesting that the program does not entail a large tradeoff between efficiency and equity