Estimating Employment Impacts of Regulations: A Review of EPA's Methods for Its Air Rules

27 February 2013
By Dr. Anne E. Smith et al.

In this report, prepared for the US Chamber of Commerce, a NERA team including Senior Vice President By Dr. Anne E. Smith and former Senior Consultant Dr. Mei Yuan reviews and evaluates how the US Environmental Protection Agency (EPA) has been estimating the employment impacts of its air regulations in the Regulatory Impact Analyses (RIAs) that EPA must provide to the Office of the President for all of its major regulations. The team considers the methods EPA has applied dating back to 1997, when the fine particulate matter National Ambient Air Quality Standard was first promulgated. NERA's report discusses three overarching conclusions about EPA’s employment impact estimation methods and areas for improvement in the future: 1) EPA makes insufficient use of full-economy models; 2) EPA makes excessive and inappropriate use of a 2002 paper by Morgenstern, Pizer, and Shih as a basis for its most recent job impact estimates; and 3) EPA should develop explicit and sound methodology-selection criteria to be applied in future RIAs.