March 2020

IZA DP No. 13075: The Ecological Impact of Place-Based Economic Policies

Teevrat Garg, Ajay Shenoy

Does economic development have an unavoidable ecological cost? We examine the ecological impacts of one of India's signature place-based economic policies involving massive tax benefits for new industrial and infrastructure development following the creation of the new state of Uttarakhand. The policy, which had an explicit pro-environment mandate, resulted in no meaningful change in local forest cover. Our results suggest that even in settings with low levels of enforcement, place-based economic policies with pro-environment mandates can achieve sizeable economic expansion without major ecological costs.