CFDP 2070R

Consequences of the Clean Water Act and the Demand for Water Quality


Publication Date: January 2017

Revision Date: June 2018

Pages: 93


Since the 1972 U.S. Clean Water Act, government and industry have invested over $1 trillion to abate water pollution, or $100 per person-year. Over half of U.S. stream and river miles, however, still violate pollution standards. We use the most comprehensive set of files ever compiled on water pollution and its determinants, including 50 million pollution readings from 240,000 monitoring sites and a network model of all U.S. rivers, to study water pollution’s trends, causes, and welfare consequences. We have three main findings. First, water pollution concentrations have fallen substantially. Between 1972 and 2001, for example, the share of waters safe for fishing grew by 12 percentage points. Second, the Clean Water Act’s grants to municipal wastewater treatment plants, which account for $650 billion in expenditure, caused some of these declines. Through these grants, it cost around $1.5 million (2014 dollars) to make one river-mile fishable for a year. We find little displacement of municipal expenditure due to a federal grant. Third, the grants’ estimated effects on housing values are smaller than the grants’ costs; we carefully discuss welfare implications.


Clean Water Act, Pollution regulation, Water quality, Cost benefit analysis, Cost effectiveness analysis, Hedonic models, Fiscal federalism, Infrastructure

JEL Classification Codes: H23, H54, H70, Q50, R31

JEL Classification Codes: H23H54H70Q50R31