Environmental Compliance and U.S. Industrial Productivity Growth

Abstract

While the decade of 1970s is generally known for the chronic oil shortages and the dramatic ris in the price of oil a significant slow down in rate of growth of productivity has also marked this and the subsequent decade of 1980s in the U.S. Though many studies have provided insight into the effect of these higher oil prices on industrial output and input demands etc., the reasons for this productivity slow down still remains somewhat of mystery. Complicating the task of unraveling this mystery is the fact that 1970s was also marked as a period of unprecedented tight environmental regulations as Congress passed a series of Amendments to the Clean Air Act Legislation during this period. As a result, many industries have faced substantial increases in cost of compliance due to the new environmental regulations. Though environmental regulation is generally believed to impair growth empirical research on the subject has been rather slow so that the real impact of these tighter environmental regulations on industrial productivity is not yet clearly understood.