Economics at your fingertips  

Profitable pollution abatement? A worker productivity perspective

Yu Pang ()

Resource and Energy Economics, 2018, vol. 52, issue C, 33-49

Abstract: Based on the empirical evidence that improved environmental quality makes workers more productive, this paper develops a model that pollution abatement can raise firm profitability by enhancing worker productivity. We investigate two types of environmental regulations – government intervention and voluntary regulation, showing that both can induce the collective action of imperfectly competitive firms to abate pollution, which increases their profits as well as social welfare. A pollution tax can prompt a firm to raise output if the productivity gain arising from total pollution reduction offsets the firm's pollution cost. We characterize the optimal pollution tax and demonstrate that the combination of a pollution tax and an output subsidy can lead to the social optimum. Voluntary regulation tends to fully internalize the productivity effect of reduced pollution for firms, although it facilitates firms’ collusion in restricting production. Moreover, we conduct a simulation evaluating the welfare consequences of the two regulations in comparison with the social optimum.

Keywords: Pollution abatement; Worker productivity; Pollution tax; Social optimum; Voluntary environmental agreement (search for similar items in EconPapers)
JEL-codes: D21 J24 Q52 Q58 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Resource and Energy Economics is currently edited by J. F. Shogren and S. Smulders

More articles in Resource and Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-05-11
Handle: RePEc:eee:resene:v:52:y:2018:i:c:p:33-49