Firm location decisions are one of the most important decisions managers make, optimising factors such as proximity to customers, suppliers, and useful information. We use an environmental relocation policy that randomly moved over 20,000 small firms from New Delhi to industrial areas outside the city over several years. We find that a reduction in firm presence improves measured air quality but is costly for firms: relocated firms have a high rate of exit, which increases in the distance relocated. The exit effect could have been mitigated by allocating firms to plots in the industrial area optimally by industry.
STEG Project Policy Brief
• Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy,
Research Theme 4: Trade and Spatial Frictions,
Cross-Cutting Issue 1: Gender,
Cross-Cutting Issue 2: Climate Change and the Environment
Firm Relocation as Environmental Policy: Impacts on Agglomeration, Workers and the Environment
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