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Environmental Regulation And Manufacturing Productivity At The Plant Level

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Author Info
Wayne B Gray
Ronald J Shadbegian

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Abstract

This paper presents results for an analysis of plant-level data from three manufacturing industries (paper, oil, and steel). We combine productivity data from the Longitudinal Research Database ( LRD ) with pollution abatement expenditures from the Census Bureau's Pollution Abatement Cost and Expenditures (PACE) survey, as well as regulatory measures taken from datasets maintained by the Environmental Protection Agency. We use 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. These results are generally consistent across industries and for different estimation methods. Our 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.

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File URL: http://www.ces.census.gov/index.php/ces/cespapers?down_key=100215
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 93-6.

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Date of creation: Mar 1993
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Handle: RePEc:cen:wpaper:93-6

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Related research
Keywords: CES; economic; research; micro; data; microdata; chief; economist;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Klaus Conrad & Catherine J. Morrison, 1985. "The Impact of Pollution Abatement Investment on Productivity Change: AnEmpirical Comparison of the U.S., Germany, and Canada," NBER Working Papers 1763, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Christainsen, Gregory B & Haveman, Robert H, 1981. "Public Regulations and the Slowdown in Productivity Growth," American Economic Review, American Economic Association, vol. 71(2), pages 320-25, May. [Downloadable!] (restricted)
  3. Dale W. Jorgenson & Peter J. Wilcoxen, 1990. "Environmental Regulation and U.S. Economic Growth," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 314-340, Summer. [Downloadable!] (restricted)
  4. Gollop, Frank M & Roberts, Mark J, 1983. "Environmental Regulations and Productivity Growth: The Case of Fossil-Fueled Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 654-74, August. [Downloadable!] (restricted)
  5. Barbera, Anthony J & McConnell, Virginia D, 1986. "Effects of Pollution Control on Industry Productivity: A Factor Demand Approach," Journal of Industrial Economics, Blackwell Publishing, vol. 35(2), pages 161-72, December. [Downloadable!] (restricted)
  6. J. R. Norsworthy & Michael J. Harper & Kent Kunze, 1979. "The Slowdown in Productivity Growth: Analysis of Some Contributing factors," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1979-2), pages 387-422. [Downloadable!]
  7. Viscusi, W Kip, 1983. "Frameworks for Analyzing the Effects of Risk and Environmental Regulations on Productivity," American Economic Review, American Economic Association, vol. 73(4), pages 793-801, September. [Downloadable!] (restricted)
  8. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December. [Downloadable!] (restricted)
  9. Kim B. Clark, 1980. "The impact of unionization on productivity: A case study," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 33(4), pages 451-469, July.
  10. Deily, Mary E. & Gray, Wayne B., 1991. "Enforcement of pollution regulations in a declining industry," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 260-274, November. [Downloadable!] (restricted)
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  1. Gale Boyd & George Tolley & Joseph Pang, 2002. "Plant Level Productivity, Efficiency, and Environmental Performance of the Container Glass Industry," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(1), pages 29-43, September. [Downloadable!] (restricted)
  2. Emilio Galdeano Gómez, 2002. "Competitividad de las cooperativas hortofrutícolas: análisis del impacto económico de las acciones de calidad y medioambientales en las OPFH andaluzas," CIRIEC-España, revista de economía pública, social y cooperativa, CIRIEC-España, issue 41, pages 53-83, August. [Downloadable!]
  3. Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  4. Erik Biørn & Rolf Golombek* & Arvid Raknerud, 1998. "Environmental Regulations and Plant Exit," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 11(1), pages 35-59, January. [Downloadable!] (restricted)
  5. Eli Berman & Linda T. Bui, 1997. "Environmental Regulation and Labor Demand: Evidence from the South Coast Air Basin," NBER Working Papers 6299, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. David Pearce & Charles Palmer, 2001. "Public and private spending for environmental protection: a cross-country policy analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 22(4), pages 403-456, December. [Downloadable!]
  7. Vernon Henderson, 1995. "Effects of Air Quality Regulation," NBER Working Papers 5118, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Satish Joshi & Ranjani Krishnan & Lester Lave, 2002. "Estimating the Hidden Costs of Environmental Regulation," Working Papers 02-10, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  9. Jenkins, Rhys, 1998. "Environmental Regulation and International Competitiveness: A Review of Literature and Some European Evidence," Discussion Papers 01, United Nations University, Institute for New Technologies. [Downloadable!]
  10. Gomez, Emilio Galdeano & Lorente, Jose Cespedes & Rodriguez, Manuel Rodriguez, 2002. "Environmental and Quality Improvement Practices: Their Analysis as Components of the Value Added in Horticultural Firms," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24870, European Association of Agricultural Economists. [Downloadable!]
  11. Adam B. Jaffe & Karen Palmer, 1996. "Environmental Regulation and Innovation: A Panel Data Study," NBER Working Papers 5545, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Glen Dowell & Stuart Hart & Bernard Yeung, 1999. "Do Corporate Global Environmental Standards in Emerging Markets Create Or Destroy Market Value," William Davidson Institute Working Papers Series 259, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  13. Mary L Streitwieser, 1994. "Cross Sectional Variation In Toxic Waste Releases From The U.S. Chemical Industry," Working Papers 94-8, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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