Skip to main content
SpringerLink
Log in

Pollution abatement costs and productivity: does the type of cost matter?

  • Original Paper
  • Published:
Letters in Spatial and Resource Sciences Aims and scope Submit manuscript

Abstract

This paper analyzes the effect of pollution abatement costs on the productivity of manufacturing industries. Two opposing views prevail on the topic: One view criticizes regulations for imposing excessive cost and reducing competitiveness of domestic firms. The second view, on the other hand, argues that regulations might encourage firms to seek for cleaner technologies hence, promote innovation and productivity. Using US industry data from 1988 to 1994, I find productivity is negatively related to pollution abatement costs. However, when analyzed separately, pollution abatement operating costs and pollution abatement capital expenditures produce different results. While the former is always negatively correlated with productivity, the results for the latter are not significant or even positive under some specifications. This reveals that how industries choose to comply with regulations might matter.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. See Jaffe et al. (1995) for a detailed literature review.

  2. Economists are mostly interested in the effect of policies on tfp growth rather than tfp levels. In addition, the results with a tfp growth are more general and a positive growth effect will also mean a positive impact on levels.

  3. The PACE survey was conducted annually between 1973 and 1994 (with the exception of 1987), but was discontinued after 1994 by the US Census Bureau for budgetary reasons. Two other surveys are conducted in 1999 and 2005. I focus on the last seven consecutive years.

  4. The Hausman specification tests reject the appropriateness of the random-effects estimators in all specifications. The results are not reported but available upon request.

  5. This seems a small change but the mean of tfp growth in the sample is 0.0038.

References

  • Barbera, A.J., McConnell, V.D.: The impact of environmental regulations on industry productivity: direct and indirect effects. J. Environ. Econ. Manag. 18, 50–65 (1990)

    Article  Google Scholar 

  • Becker, R.A.: Air pollution abatement costs under the Clean Air Act: evidence from the PACE survey. J. Environ. Econ. Manag. 50, 144–169 (2005)

    Article  Google Scholar 

  • Becker, R.A., Pasurka, C., Shadbegian, R.J.: Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditure Survey. J. Environ. Econ. Manag. 66, 523–538 (2013)

    Article  Google Scholar 

  • Berman, E., Bui, L.T.M.: Environmental regulation and productivity: evidence from oil refineries. Rev. Econ. Stat. 83, 498–510 (2001)

    Article  Google Scholar 

  • Brunnermeier, S.B., Cohen, M.A.: Determinants of environmental innovation in US manufacturing industries. J. Env. Econ. Manag. 45, 278–293 (2003)

    Article  Google Scholar 

  • Gallaher, M.P., Murray, B.C., Nicholson, R.L., Ross, M.T.: Redesign of the Pollution Abatement Costs and Expenditures (PACE) Survey: Findings and Recommendations from the Pretest and Follow-up Visits Final Report. December 2006 http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-0498-01.pdf/$file/EE-0498-01.pdf

  • Gallop, F.M., Roberts, M.J.: Environmental regulations and productivity growth: The case of fossil-fueled electric power generation. J. Political Econ. 91, 654–674 (1983)

    Article  Google Scholar 

  • Gray, W.B., Shadbegian, R.J.: Pollution abatement costs, regulation, and plant-level productivity. NBER Working Paper No: 4994 (1995)

  • Greenstone, M., List, J.A., Syverson, C.: The effects of environmental regulation on the competitiveness of U.S. manufacturing. NBER Working Paper No: 18392 (2012)

  • Jaffe, A.B., Peterson, S.R., Portney, P.R., Stavins, R.N.: Environmental regulation and the competitiveness of U.S. manufacturing: what does the evidence tell us? J. Econ. Lit. 33, 132–163 (1995)

    Google Scholar 

  • Jaffe, A.B., Palmer, K.: Environmental regulation and innovation: a panel data study. Rev. of Econ. and Stat. 79, 610–619 (1997)

    Article  Google Scholar 

  • Porter, M.E.: America’s green strategy. Scientific Am. 264, 168 (1991)

    Article  Google Scholar 

  • Porter, M.E., van der Linde, C.: Toward a new conception of the environment-competitiveness relationship. J. Econ. Perspect. 9, 97–118 (1995)

    Article  Google Scholar 

  • Shadbegian, R.J., Gray, W.B.: Pollution abatement expenditures and plant-level productivity: a production function approach. Ecol. Econ. 54, 196–208 (2005)

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Social Sciences, University of Texas at Tyler, 3900 University Blvd., Tyler, TX, 75799, USA

    Meryem Saygili

Authors
  1. Meryem Saygili
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Meryem Saygili.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Saygili, M. Pollution abatement costs and productivity: does the type of cost matter?. Lett Spat Resour Sci 9, 1–7 (2016). https://doi.org/10.1007/s12076-014-0127-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12076-014-0127-x

Keywords

JEL Classification

Search

Navigation