Environmental Regulation and Manufacturing Productivity at the Plant Level

Wayne Gray and Ron Shadbegian

No 4321, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the connection between productivity, pollution abatement expenditures, and other measures of environmental regulation for plants in three industries (paper, oil, and steel). We examine data from 1979 to 1985, considering, both labor and total factor productivity, both levels and growth rates, and both annual measures and averages over the period. We find a strong connection between regulation and productivity when regulation is measured by compliance costs. More regulated plants have significantly lower productivity levels and slower productivity growth rates than less regulated plants. The magnitude of the impacts are larger than expected: a $1 increase in compliance costs appears to reduce TFP by the equivalent of $3 to $4. Thus, commonly used methods of calculating the impact of regulation on productivity are substantially underestimated. Other measures of regulation (compliance status, enforcement activity, and emissions) show much less consistent results. Higher enforcement, lower compliance, and higher emissions are generally associated with lower productivity levels and slower productivity growth, but the coefficients are rarely significant.

JEL-codes: D24 Q28 (search for similar items in EconPapers)
Date: 1993-04
New Economics Papers: this item is included in nep-eff, nep-ene and nep-env
Note: PR EEE
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Citations: View citations in EconPapers (65)

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Working Paper: Environmental Regulation And Manufacturing Productivity At The Plant Level (1993)
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