Sustainable development requires attaining a balance between maintaining environmental quality and controlling the economic impact of environmental regulations. This dissertation examines the use of natural resources in developing countries.

The second chapter examines the product level response of firms to changes in environmental regulation at the intensive (quantity per variety) and extensive (number of varieties) margins of their product portfolios. I find (a) that firms react to changes in enforcement by increasing the share of their product portfolios allocated to clean products, (b) that consistent with theory, the magnitude of this effect varies across the productivity distribution, and (c) that this in turn affects competition and quantities supplied in these markets.

In the third chapter, we examine the effect of political decentralization on pollution spillovers across jurisdictional boundaries. Upstream water use has spillover effects on downstream jurisdictions, and greater decentralization may exacerbate these spillovers, as upstream communities have fewer incentives to restrain their members from polluting the river at the border. We find that pollution increases by 2.3% for every kilometer closer a river gets to the exiting border, but in the stretch within 5 kilometers of the border this increase jumps to 18.6% per kilometer, which suggests the presence of strategic spillovers.

In the fourth chapter, we examine the effect of new access to electricity on GDP and population density. We isolate the portion of the variation in grid expansions in Brazil that is attributable to "exogenous" engineering cost considerations to estimate the development effects of electrification between 1950 and 2000.