Environmental Regulation And Manufacturing Productivity At The Plant Level
AbstractThis 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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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 93-6.
Date of creation: Mar 1993
Date of revision:
CES; economic; research; micro; data; microdata; chief; economist;
Other versions of this item:
- Wayne B. Gray & Ronald J. Shadbegian, 1993. "Environmental Regulation and Manufacturing Productivity at the Plant Level," NBER Working Papers 4321, National Bureau of Economic Research, Inc.
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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