Pollution and Business Activity : Evidence From Toxic Chemical Spills

We show that major toxic chemical spills have persistent adverse effects on local business activity and contribute to an increase in business concentration by hurting smaller establishments while benefiting the largest establishments. Highlighting the importance of heightened health risk perceptions, these effects are also present for establishments that are located far from spill sites but are exposed to intense television coverage about the spills. We identify two likely explanations for these persistent adverse effects on local business activity - worsening of credit frictions and migration of population and income away from counties exposed to major toxic chemical spills.