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Publications [#26416] of Stephen P. Ryan

Working Papers

  1. Stephen P. Ryan, The Costs of Environmental Regulation in a Concentrated Industry, Job Market Paper (September, 2004) [pdf]
    (last updated on 2004/09/29)

    The typical cost analysis of environmental regulations consists of an engineering estimate of the compliance costs. In industries where fixed costs are an important determinant of market structure this static analysis ignores the dynamic effects of the regulation on market power, as higher costs of entry and investment can increase concentration. I evaluate the welfare effects of the 1990 Amendments to the Clean Air Act on the US Portland cement industry, accounting for these effects through a fully dynamic model of oligopoly in the tradition of Ericson and Pakes (1995). Using a recently developed two-step estimator, I recover the entire cost structure of the industry, including the distribution of sunk entry costs and adjustment costs of investment. I solve for the Markov perfect Nash equilibrium (MPNE) of the model and simulate the welfare effects of the Amendments. I find static analysis understates costs by an order of magnitude, and that the regulations impose a large welfare penalty on producers and consumers, primarily through a shift in the distribution of the sunk costs of entry.

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