Amy Min Zhang

Abstract: How does environmental regulation reshape spatial labor markets over decades as regional comparative advantage evolves? I develop a new spatial environmental growth model to capture regional transition dynamics. By affecting polluting production, environmental regulations direct technology investment and shift the comparative advantage of regions with lower regulatory exposure towards polluting industries. This shift interacts with worker migration, reshaping local employment and welfare. I apply the model to the Clean Air Act Amendments of 1990, a place-based environmental regulation. Quantitatively, the CAA accounts for 23.6% of the employment decline in polluting sectors in highly regulated regions over three decades. Reallocation widens the employment gap between highly and less-regulated regions while mitigating aggregate employment losses, with shifts in regional comparative advantage across sectors playing a key role.