WEAI/AERE 2012 - Individual Paper Abstract
Title: Inequality indices and regulatory environmental justice analysis
Author(s): Kelly Maguire; Glenn SHERIFF, National Center for Environmental Economics, U.S. Environmental Protection Agency, 1200 Pennsylvania Ave. NW (1809T), Washington, DC , USA, 202-566-2265, 202-566-2373, sheriff.glenn@epa.gov
Abstract:
Economists have been interested in analyzing the distribution of environmental benefits for almost as long as they have been calculating the benefits themselves. While the tools for conducting benefits analysis are well developed, those for examining distributional effects are less so. In this paper, we show how inequality indices developed for the study of income distribution can be adapted for use in regulatory environmental justice analysis.
As a policy issue, environmental justice arises from a concern that certain sub-populations, typically defined by race or income, have historically borne disproportionate environmental burdens due to discrimination, disenfranchisement, or some other unjust cause. In the context of new regulations, environmental justice analysis can investigate whether such disparities exist, and how regulatory options affect them.
To be useful in the regulatory process, environmental justice analysis should facilitate the ranking of alternative policy outcomes. Such rankings are inherently normative, and thus should reflect the views of society as opposed the views of the technical staff preparing the analysis. There is a tradeoff, however. Purely descriptive analysis such as pollution exposure rates by sub-populations may be difficult to interpret in a consistent manner across different types of rules. On the other hand, methods for aggregating the data into easily presented rankings have the potential for implicitly reflecting the staff's value judgments. The ideal tool would enable interpretation and comparison of sub-group distributions of environmental outcomes in a variety of regulatory contexts, while allowing the user to specify explicitly, and perform sensitivity analysis for, the normative assumptions it is necessary to impose.
The social evaluation functions underlying inequality indices are a promising tool for environmental justice analysis since they can quantify the baseline distribution of environmental outcomes and ex post distributions for regulatory outcomes for the population as a whole as well as for subpopulations of concern. They can also be used to rank the desirability of regulatory options in a way that makes normative judgments transparent, while allowing flexibility in the way such norms are specified.
In the paper, we place particular emphasis on examining the theoretical underpinnings of social evaluation functions frequently used to quantify income and health distribution, and the non-trivial challenges involved in adapting them to analyze the distribution of a bad (e.g., pollution) across various sub-populations. We show why some of the most commonly used inequality indexes (e.g., Gini coefficient, Atkinson index, and concentration index) have substantial drawbacks. In contrast, the Kolm index, although rarely used for income analysis, has properties that make it potentially well-suited for evaluating distributions of adverse environmental outcomes. As an illustration, we apply this technique to analyze the environmental justice implications of an air quality rule.