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An empirical analysis of the nonlinear relationship between environmental regulation and manufacturing productivity

Author

Listed:
  • Armando Sanchez-Vargas

    (National Autonomous University of Mexico)

  • Ricardo Mansilla-Sanchez

    (National Autonomous University of Mexico)

  • Alonso Aguilar-Ibarra

    (National Autonomous University of Mexico)

Abstract

The relationship between environmental regulation and productivity has been broadly analyzed. Here, we propose the use of one member of the family of exponential Gumbel distributions in order to study a potential nonlinear relationship between environmental regulation and manufacturing productivity in Mexico using a data set at the plant level. We show that the link between environmental regulation and productivity is in fact nonlinear and that there is a decreasing trade-off between those variables in the manufacturing industry. We find that such trade-off is high for small firms, but almost negligible for large companies. Thus, we argue that much of the debate on different effects is due to the heterogeneity of the industry. This result might be useful for the design of policies devoted to enhancing environmental performance.

Suggested Citation

  • Armando Sanchez-Vargas & Ricardo Mansilla-Sanchez & Alonso Aguilar-Ibarra, 2013. "An empirical analysis of the nonlinear relationship between environmental regulation and manufacturing productivity," Journal of Applied Economics, Universidad del CEMA, vol. 16, pages 357-372, November.
    • Handle: RePEc:cem:jaecon:v:16:y:2013:n:2:p:357-372
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    Citations

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    Cited by:

    1. Dechezleprêtre, Antoine & Kozluk, Tomasz & Kruse, Tobias & Nachtigall, Daniel & de Serres, Alain, 2019. "Do Environmental and Economic Performance Go Together? A Review of Micro-level Empirical Evidence from the Past Decade or So," International Review of Environmental and Resource Economics, now publishers, vol. 13(1-2), pages 1-118, April.
    2. Ghisetti, Claudia & Quatraro, Francesco, 2017. "Green Technologies and Environmental Productivity: A Cross-sectoral Analysis of Direct and Indirect Effects in Italian Regions," Ecological Economics, Elsevier, vol. 132(C), pages 1-13.
    3. Siedschlag, Iulia & Meneto, Stefano, 2020. "Green innovations and export performance," Papers WP674, Economic and Social Research Institute (ESRI).
    4. Thanh Tam Nguyen-Huu & Minh Nguyen-Khac & Quoc Tran-Nam, 2017. "The role of environmental regulations and innovation in TFP convergence: Evidence from manufacturing SMEs in Vietnam," WIDER Working Paper Series 092, World Institute for Development Economic Research (UNU-WIDER).
    5. Mingyue Wang & Yingming Li & Zitong Wang & Junqiang Li, 2022. "The Heterogeneous Relationship between Pollution Charges and Enterprise Green Technology Innovation, Based on the Data of Chinese Industrial Enterprises," Energies, MDPI, vol. 15(5), pages 1-20, February.
    6. Cong Li & Xihua Liu & Xue Bai & Muhammad Umar, 2020. "Financial Development and Environmental Regulations: The Two Pillars of Green Transformation in China," IJERPH, MDPI, vol. 17(24), pages 1-17, December.
    7. Xinghua Wang & Shunchen Wu & Xiaojuan Qin & Meixiang La & Haixia Zuo, 2022. "Informal Environment Regulation, Green Technology Innovation and Air Pollution: Quasi-Natural Experiments from Prefectural Cities in China," Sustainability, MDPI, vol. 14(10), pages 1-13, May.
    8. Thanh Tam Nguyen-Huu & Minh Nguyen-Khac & Quoc Tran-Nam, 2017. "The role of environmental regulations and innovation in TFP convergence: Evidence from manufacturing SMEs in Vietnam," WIDER Working Paper Series wp-2017-92, World Institute for Development Economic Research (UNU-WIDER).
    9. Yuxin Fang & Hongjun Cao, 2022. "Environmental Decentralization, Heterogeneous Environmental Regulation, and Green Total Factor Productivity—Evidence from China," Sustainability, MDPI, vol. 14(18), pages 1-20, September.
    10. Ghisetti, Claudia & Quatraro, Francesco, 2014. "Is green Knowledge improving Environmental Productivity? Sectoral Evidence from Italian Regions," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201411, University of Turin.
    11. Zhaohui Chong & Chenglin Qin & Xinyue Ye, 2016. "Environmental Regulation, Economic Network and Sustainable Growth of Urban Agglomerations in China," Sustainability, MDPI, vol. 8(5), pages 1-21, May.
    12. Yutian Dou & Shuai Guan, 2023. "The Regionally Heterogeneous Impact of China’s Environmental Regulation on the Transformation and Upgrading of Its Industrial Structure," Sustainability, MDPI, vol. 15(24), pages 1-19, December.
    13. Siedschlag, Iulia & Yan, Weijie, 2020. "Green investments and firm performance," Papers WP672, Economic and Social Research Institute (ESRI).
    14. Siedschlag, Iulia & Yan, Weijie, 2023. "Do green investments improve firm performance? Empirical evidence from Ireland," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).

    More about this item

    Keywords

    exponential Gumbel distribution; Porter Hypothesis; nonlinear relationships; Mexico’s manufacturing industry; environmental performance;
    All these keywords.

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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