Environmental Regulation and Productivity: Evidence from Oil Refineries
AbstractWe examine the effect of air quality regulation on the productivity of some of the most heavily regulated manufacturing plants in the United States, the oil refineries of the Los Angeles (South Coast) Air Basin. We use direct measures of local air pollution regulation in this region to estimate their effects on abatement investment. Refineries not subject to these local environmental regulations are used as a comparison group. We study the period of increased regulation between 1979 and 1992. On average each regulation cost $3M per plant on compliance dates and a further $5M per plant on dates of increased stringency. We also construct measures of total factor productivity using plant level data which allow us to observe physical quantities of inputs and outputs for the entire population of refineries. Despite the high costs associated with the local regulations, productivity in the Los Angeles Air Basin refineries rose sharply during the 1987 - 1992 period, a period of decreased refinery productivity in other regions. We conclude that measures of the cost of environmental regulation may be significantly overstated. The gross costs may be far greater than the net cost, as abatement may be productive.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6776.
Date of creation: Nov 1998
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Other versions of this item:
- Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August.
- Eli Berman & Linda T.M. Bui, 1998. "Environmental Regulation and Productivity: Evidence from Oil Refineries," Papers 0091, Boston University - Industry Studies Programme.
- D2 - Microeconomics - - Production and Organizations
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-11-20 (All new papers)
- NEP-EFF-1998-11-23 (Efficiency & Productivity)
- NEP-ENV-1998-11-20 (Environmental Economics)
- NEP-PUB-1998-11-20 (Public Finance)
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