Environmental Regulation and Productivity Growth: A Study of the APEC Economies

Yanrui Wu and Bing Wang
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Bing Wang: School of Economics, Jinan University

No 07-17, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Environmental regulation has become more and more important in policy making among the world economies. How has it affected productivity growth and hence economic growth? The answer to this question is either controversial or yet to be explored in many cases. The objective of this paper is to present a case study of 17 Asian Pacific Economic Cooperation (APEC) economies. A directional distance function approach is employed to estimate output-oriented Malmquist-Luenberger productivity indices. The latter are in turn decomposed into efficiency changes and technological progress. Work in this paper differs from the existing literature by taking into consideration of the impact of environmental regulation on productivity growth. Three scenarios are modeled, ie. no control on CO2 emissions (unregulated), maintaining current emission level and a partial reduction of emissions. In general, it is found that the rates of productivity growth incorporating CO2 as an undesirable output are slightly higher than those estimated following the traditional method. Furthermore, the causes of productivity changes are also investigated in this paper.

Keywords: Technical efficiency; technological progress; total factor productivity; directional distance functions; Malmquist–Luenberger index; DEA (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007
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