Brown Bag Seminar - Cameron LaPoint (Yale), Contaminated Capital: Brownfield Cleanups, Entrepreneurship, and Place-Based Redistribution

Paper

Contaminated Capital: Brownfield Cleanups, Entrepreneurship, and Place-Based Redistribution

Abstract:

We study whether environmental cleanup incentives operate as effective place-based redistribution by transforming contaminated land into productive capital for local entrepreneurs. We link the universe of grant applicants to the Environmental Protection Agency’s Brownfields Program with business credit records, firm outcomes, property tax parcels, mortgage activity, and rental market data. Exploiting discontinuities in cleanup grant scores via a stacked dynamic regression discontinuity design, as well as EPA funding expansions in 2018 and 2022, we find that cleanup grants increase local firm entry, survival, employment, and business credit access, with complementary effects on parcel liquidity and mortgage credit that suggest remediation improves the collateral value of formerly contaminated land. Real effects are concentrated within three miles of remediated sites and persist after construction activity ends, suggesting that remediation does more than generate temporary cleanup demand. Treatment effects are strongest in places with more severe pre-existing contamination, industrial decline, and credit frictions, and the gains accrue primarily to local owners and entrepreneurs. Environmental remediation incentives therefore increase aggregate local growth while redistributing investment towards historically capital-starved places through flypaper effects, mitigating the misallocation problem traditionally associated with place-based subsidy programs.