Conference Agenda

The clean energy transition and large-scale deindustrialization have caused major changes

in the industrial landscape of many high-income economies. This paper investigates

how closures of large industrial facilities in Germany affect surrounding communities.

By exploiting quasi-random variation in the timing of facility shutdowns, I analyze the

neighborhood-level effects of these closures using data at the 1km x 1km grid cell level.

I find that shutdowns of industrial sites lead to significant improvements in environmental

amenities as represented by air quality. These environmental benefits, however, do

not capitalize into increasing housing prices. Instead, housing values fall by up to 5%

following facility shutdowns – a result that contrasts with existing evidence for the US

context. Neighborhoods affected by industrial closures also experience substantial local

downturns with average household income dropping by 4% in the most affected neighborhoods.

The resulting total annual income loss attributable to facility shutdowns amounts

to e0.7 - e1.9 billion. Using a simplified model of neighborhood choice, I further show

that neighborhoods surrounding a closed industrial site become less amenable over time.

These findings have important implications for place-based policies in the context of significant

structural change. Additionally, using the newly assembled granular data, I show

that there exists significant inequality in the exposure to fine particulate matter across the

income distribution in Germany.