Assessing the Impact of Greenhouse Gases Emissions on Canada's Productivity Growth, 1981 to 1996: An Experimental Approach

Abstract

Despite the progress that has been made in the measurement of productivity, there have been few attempts to cast emissions of bad outputs within a joint-production framework. This paper does so. It proposes an experimental framework that depends critically on the shadow price estimates of emissions. These shadow price estimates result from the estimation of a cost function for each industry of the Canadian business sector. Using a detailed industry dataset that accounts for marketed output and greenhouse gases over the 1981-1996 period, our results suggest that the shadow values of greenhouse gas emissions are significantly different from zero. Our results also indicate that, under a non constant returns to scale technology, failing to account for greenhouse gas emissions understates productivity growth.

Keywords: shadow prices, greenhouse gases, productivity

JEL Classification: D24, O47, Q52, Q53, L16