Informal environmental regulation of industrial air pollution: Does neighborhood inequality matter?

This paper analyzes if neighborhood income inequality has an effect on informal regulation of environmental
quality, using census tract - level data on industrial air pollution exposure from EPA's Risk Screening Environmental
Indicators and income and demographic variables from the American Community Survey and EPA's Smart Location Database. Estimating a spatial lag model and controlling for formal regulation at the states level, we nd evidence that overall neighborhood inequality - as measured by the ratio between the fourth and the second income quintile or the neighborhood Gini coefficient - increases local air pollution exposure, whereas a concentration of top incomes reduces local exposure. The positive coefficient of the
general inequality measure is driven by urban neighborhoods, whereas the negative coefficient of top incomes is stronger in rural areas. We explain these findings by two contradicting effects of inequality: On the
one hand, overall inequality reduces collective action and thus the organizing capacities for environmental
improvements. On the other hand, a concentration of income at the top enhances the ability of rich residents
to negotiate with regulators or polluting plants in their vicinity.