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Pollution Abatement Costs, Regulation, and Plant-Level Productivity

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  • Wayne B. Gray
  • Ronald J. Shadbegian

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 1990, considering both total factor productivity levels and growth rates. Plants with higher abatement cost levels have significantly lower productivity levels. The magnitude of the impact is somewhat larger than expected: $1 greater abatement costs appears to be associated with the equivalent of $1.74 in lower productivity for paper mills, $1.35 for oil refineries, and $3.28 for steel mills. However, these results apply only to variation across plants in productivity levels. Estimates looking at productivity variation within plants over time, or estimates using productivity growth rates show a smaller (and insignificant) relationship between abatement costs and productivity. Other measures of environmental regulation faced by the plants (compliance status, enforcement activity, and emissions) are not significantly related to productivity.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4994.

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Date of creation: Jan 1995
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Publication status: published as Gray, Wayne B. (ed.) Economic costs and consequences of environmental regulation, International Library of Environmental Economics and Policy. Aldershot, U.K. and Burlington, VT: Ashgate, Dartmouth, 2002.
Handle: RePEc:nbr:nberwo:4994

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  1. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 998-1006, December.
  2. Mary E. Deily & Wayne B. Gray, 1989. "Enforcement of pollution regulations in a declining industry," Working Paper 8912, Federal Reserve Bank of Cleveland.
  3. Viscusi, W Kip, 1983. "Frameworks for Analyzing the Effects of Risk and Environmental Regulations on Productivity," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 793-801, September.
  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, University of Chicago Press, vol. 91(4), pages 654-74, August.
  5. Sang V Nguyen & Edward C Kokkelenberg, 1991. "Measuring Total Factor Productivity, Technical Change And The Rate Of Returns To Research And Development," Working Papers, Center for Economic Studies, U.S. Census Bureau 91-3, Center for Economic Studies, U.S. Census Bureau.
  6. Barbera, Anthony J & McConnell, Virginia D, 1986. "Effects of Pollution Control on Industry Productivity: A Factor Demand Approach," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(2), pages 161-72, December.
  7. Robert H Mcguckin & George A Pascoe, 1988. "The Longitudinal Research Database (LRD): Status And Research Possibilities," Working Papers, Center for Economic Studies, U.S. Census Bureau 88-2, Center for Economic Studies, U.S. Census Bureau.
  8. Kim B. Clark, 1980. "The impact of unionization on productivity: A case study," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(4), pages 451-469, July.
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