An empirical analysis of the nonlinear relationship between environmental regulation and manufacturing productivity

Armando Sanchez-Vargas, Ricardo Mansilla-Sanchez and Alonso Aguilar-Ibarra
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Armando Sanchez-Vargas: National Autonomous University of Mexico
Ricardo Mansilla-Sanchez: National Autonomous University of Mexico
Alonso Aguilar-Ibarra: National Autonomous University of Mexico

Journal of Applied Economics, 2013, vol. 16, 357-372

Abstract: The relationship between environmental regulation and productivity has been broadly analyzed. Here, we propose the use of one member of the family of exponential Gumbel distributions in order to study a potential nonlinear relationship between environmental regulation and manufacturing productivity in Mexico using a data set at the plant level. We show that the link between environmental regulation and productivity is in fact nonlinear and that there is a decreasing trade-off between those variables in the manufacturing industry. We find that such trade-off is high for small firms, but almost negligible for large companies. Thus, we argue that much of the debate on different effects is due to the heterogeneity of the industry. This result might be useful for the design of policies devoted to enhancing environmental performance.

Keywords: exponential Gumbel distribution; Porter Hypothesis; nonlinear relationships; Mexico’s manufacturing industry; environmental performance (search for similar items in EconPapers)
JEL-codes: C46 C51 D24 Q52 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:16:y:2013:n:2:p:357-372

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