IDEAS home Printed from https://ideas.repec.org/p/cen/wpaper/13-51.html
   My bibliography  Save this paper

Environmental Regulation, Abatement, and Productivity: A Frontier Analysis

Author

Listed:
  • Shital Sharma

Abstract

This research studies the link between environmental regulation and plant level productivity in two U.S. manufacturing industries: pulp and paper mills and oil refineries using Data Envelopment Analysis (DEA) models. Data on abatement spending, emissions and abated emissions are used in different DEA models to study plant productivity outcomes when accounting for abatement spending or emissions regulations. Results indicate that pulp and paper mills and oil refineries in the U.S. suffered decreases in productivity due to pollution abatement activities from 1974 to 2000. These losses in productivity are substantial but have been slowly trending downwards even when the regulations have tended to become more stringent and emission of pollutants has declined suggesting that the best practice has shifted over time. Results also show that the reported abatement expenditures are not able to explain all the losses arising out of regulation suggesting that these abatement expenditures are consistently under-reported.

Suggested Citation

  • Shital Sharma, 2013. "Environmental Regulation, Abatement, and Productivity: A Frontier Analysis," Working Papers 13-51, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:13-51
    as

    Download full text from publisher

    File URL: https://www2.census.gov/ces/wp/2013/CES-WP-13-51.pdf
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gray, Wayne B. & Shadbegian, R.J.Ronald J., 2004. "'Optimal' pollution abatement--whose benefits matter, and how much?," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 510-534, May.
    2. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
    3. Boyd, Gale A. & McClelland, John D., 1999. "The Impact of Environmental Constraints on Productivity Improvement in Integrated Paper Plants," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 121-142, September.
    4. 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.
    5. Shadbegian, Ronald J. & Gray, Wayne B., 2005. "Pollution abatement expenditures and plant-level productivity: A production function approach," Ecological Economics, Elsevier, vol. 54(2-3), pages 196-208, August.
    6. Ronald Shadbegian & Wayne Gray, 2006. "Assessing multi-dimensional performance: environmental and economic outcomes," Journal of Productivity Analysis, Springer, vol. 26(3), pages 213-234, December.
    7. Deborah Aiken & Rolf Färe & Shawna Grosskopf & Carl Pasurka, 2009. "Pollution Abatement and Productivity Growth: Evidence from Germany, Japan, the Netherlands, and the United States," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 44(1), pages 11-28, September.
    8. Michael Greenstone & John A. List & Chad Syverson, 2011. "The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing," Working Papers 11-03, Center for Economic Studies, U.S. Census Bureau.
    9. Shimshack, Jay P. & Ward, Michael B., 2008. "Enforcement and over-compliance," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 90-105, January.
    10. Richard D. Morgenstern & William A. Pizer & Jhih-Shyang Shih, 2001. "The Cost Of Environmental Protection," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 732-738, November.
    11. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
    12. Victoria Shestalova, 2003. "Sequential Malmquist Indices of Productivity Growth: An Application to OECD Industrial Activities," Journal of Productivity Analysis, Springer, vol. 19(2), pages 211-226, April.
    13. Randy A. Becker & Ronald J. Shadbegian, 2007. "Issues and Challenges in Measuring Environmental Expenditures by U.S. Manufacturing: The Redevelopment of the PACE Survey," NCEE Working Paper Series 200708, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jul 2007.
    14. Banker, Rajiv D. & Cooper, William W. & Seiford, Lawrence M. & Thrall, Robert M. & Zhu, Joe, 2004. "Returns to scale in different DEA models," European Journal of Operational Research, Elsevier, vol. 154(2), pages 345-362, April.
    15. 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.
    16. Cook, Wade D. & Seiford, Larry M., 2009. "Data envelopment analysis (DEA) - Thirty years on," European Journal of Operational Research, Elsevier, vol. 192(1), pages 1-17, January.
    17. 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 654-674, August.
    18. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
    19. 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 320-325, May.
    20. Seiford, Lawrence M. & Zhu, Joe, 2005. "A response to comments on modeling undesirable factors in efficiency evaluation," European Journal of Operational Research, Elsevier, vol. 161(2), pages 579-581, March.
    21. Shimshack, Jay P. & Ward, Michael B., 2005. "Regulator reputation, enforcement, and environmental compliance," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 519-540, November.
    22. Gray, Wayne B. & Shadbegian, Ronald J., 2003. "Plant vintage, technology, and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 384-402, November.
    23. Michael Greenstone, 2002. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1175-1219, December.
    24. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
    25. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
    26. Barbera, Anthony J & McConnell, Virginia D, 1986. "Effects of Pollution Control on Industry Productivity: A Factor Demand Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 161-172, December.
    27. Wilson, Paul W, 1993. "Detecting Outliers in Deterministic Nonparametric Frontier Models with Multiple Outputs," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 319-323, July.
    28. 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(2), pages 387-422.
    29. Mette Asmild & Joseph Paradi & Vanita Aggarwall & Claire Schaffnit, 2004. "Combining DEA Window Analysis with the Malmquist Index Approach in a Study of the Canadian Banking Industry," Journal of Productivity Analysis, Springer, vol. 21(1), pages 67-89, January.
    30. Runar Brännlund & Rolf Färe & Shawna Grosskopf, 1995. "Environmental regulation and profitability: An application to Swedish pulp and paper mills," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(1), pages 23-36, July.
    31. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    32. Fare, Rolf & Grosskopf, Shawna & Pasurka, Carl Jr., 2007. "Pollution abatement activities and traditional productivity," Ecological Economics, Elsevier, vol. 62(3-4), pages 673-682, May.
    33. Seiford, Lawrence M. & Zhu, Joe, 2002. "Modeling undesirable factors in efficiency evaluation," European Journal of Operational Research, Elsevier, vol. 142(1), pages 16-20, October.
    34. Rolf Färe & Shawna Grosskopf, 2000. "Theory and Application of Directional Distance Functions," Journal of Productivity Analysis, Springer, vol. 13(2), pages 93-103, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xinming Du, 2023. "Symptom or Culprit? Social Media, Air Pollution, and Violence," CESifo Working Paper Series 10296, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Johan Brolund & Robert Lundmark, 2017. "Effect of Environmental Regulation Stringency on the Pulp and Paper Industry," Sustainability, MDPI, vol. 9(12), pages 1-16, December.
    2. Shadbegian, Ronald J. & Gray, Wayne B., 2005. "Pollution abatement expenditures and plant-level productivity: A production function approach," Ecological Economics, Elsevier, vol. 54(2-3), pages 196-208, August.
    3. Ronald Shadbegian & Wayne Gray, 2006. "Assessing multi-dimensional performance: environmental and economic outcomes," Journal of Productivity Analysis, Springer, vol. 26(3), pages 213-234, December.
    4. Rassier, Dylan G. & Earnhart, Dietrich, 2015. "Effects of environmental regulation on actual and expected profitability," Ecological Economics, Elsevier, vol. 112(C), pages 129-140.
    5. Earnhart, Dietrich & Germeshausen, Robert & von Graevenitz, Kathrine, 2022. "Effects of information-based regulation on financial outcomes: Evidence from the European Union's public emission registry," ZEW Discussion Papers 22-015, ZEW - Leibniz Centre for European Economic Research.
    6. Gray, Wayne B. & Shadbegian, Ronald J., 2003. "Plant vintage, technology, and environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 384-402, November.
    7. Nikos Chatzistamoulou & George Diagourtas & Kostas Kounetas, 2017. "Do pollution abatement expenditures lead to higher productivity growth? Evidence from Greek manufacturing industries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(1), pages 15-34, January.
    8. Becker, Randy A., 2011. "Local environmental regulation and plant-level productivity," Ecological Economics, Elsevier, vol. 70(12), pages 2516-2522.
    9. You Wu & Jichuan Sheng & Fang Huang, 2015. "China’s future investments in environmental protection and control of manufacturing industry: lessons from developed countries," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 77(3), pages 1889-1901, July.
    10. Becker, Randy A., 2011. "Local environmental regulation and plant-level productivity," Ecological Economics, Elsevier, vol. 70(12), pages 2516-2522.
    11. Dietrich Earnhart & Dylan G. Rassier, 2016. "“Effective regulatory stringency” and firms’ profitability: the effects of effluent limits and government monitoring," Journal of Regulatory Economics, Springer, vol. 50(2), pages 111-145, October.
    12. Fleishman, Rachel & Alexander, Rob & Bretschneider, Stuart & Popp, David, 2009. "Does regulation stimulate productivity? The effect of air quality policies on the efficiency of US power plants," Energy Policy, Elsevier, vol. 37(11), pages 4574-4582, November.
    13. Anabel Zárate-Marco & Jaime Vallés-Giménez, 2015. "Environmental tax and productivity in a decentralized context: new findings on the Porter hypothesis," European Journal of Law and Economics, Springer, vol. 40(2), pages 313-339, October.
    14. Telle, Kjetil & Larsson, Jan, 2007. "Do environmental regulations hamper productivity growth? How accounting for improvements of plants' environmental performance can change the conclusion," Ecological Economics, Elsevier, vol. 61(2-3), pages 438-445, March.
    15. Morgan, Cynthia & Pasurka, Carl & Shadbegian, Ron & Belova, Anna & Casey, Brendan, 2023. "Estimating the cost of environmental regulations and technological change with limited information," Ecological Economics, Elsevier, vol. 204(PA).
    16. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
    17. Jeanneaux, Philippe & Latruffe, Laure, 2016. "Modelling pollution-generating technologies in performance benchmarking: Recent developments, limits and future prospects in the nonparametric frameworkAuthor-Name: Dakpo, K. Hervé," European Journal of Operational Research, Elsevier, vol. 250(2), pages 347-359.
    18. Stefan Ambec & Paul Lanoie, 2007. "When and Why Does It Pay To Be Green?," CIRANO Working Papers 2007s-20, CIRANO.
    19. Ambec, Stefan & Barla, Philippe, 2001. "Productivité et réglementation environnementale: une analyse de l'hypothèse de Porter," Cahiers de recherche 0107, Université Laval - Département d'économique.
    20. Ronald J Shadbegian & Wayne B Gray, 2001. "When Do Firms Shift Production Across States to Avoid Environmental Regulation?," Working Papers 01-18, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:13-51. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dawn Anderson (email available below). General contact details of provider: https://edirc.repec.org/data/cesgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.