The Effects of Environmental Regulation on the Competitiveness of U.S. Manufacturing

54 Pages Posted: 11 Feb 2011

See all articles by Michael Greenstone

Michael Greenstone

University of Chicago - Department of Economics; Becker Friedman Institute for Economics; National Bureau of Economic Research (NBER)

John A. List

University of Chicago - Department of Economics

Chad Syverson

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: February 1, 2011

Abstract

Whether and to what extent environmental regulations influence the competitiveness of firms remains a hotly debated issue. Using detailed production data from tens of thousands of U.S. manufacturing plants drawn from Annual Survey of Manufactures, we estimate the effects of environmental regulations - captured by the Clean Air Act Amendments’ division of counties into pollutant-specific nonattainment and attainment categories - on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, a nonattainment designation is associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly discernable effects on productivity, though effects are also seen among particulates and sulfur dioxide emitters. Carbon monoxide nonattainment, on the other hand, appears to increase measured TFP, though this appears to be concentrated among refineries. When we apply corrections for two likely sources of positive bias in these estimates (price mismeasurement and sample selection on survival), we estimate that the total TFP loss for polluting plants in nonattaining counties is 4.8 percent. This corresponds to an annual lost output in the manufacturing sector of roughly $14.7 billion in 1987 dollars ($24.4 billion in 2009 dollars). These costs have important implications for both the intensity and location of firm expansions.

Suggested Citation

Greenstone, Michael and List, John A. and Syverson, Chad, The Effects of Environmental Regulation on the Competitiveness of U.S. Manufacturing (February 1, 2011). US Census Bureau Center for Economic Studies Paper No. CES-WP-11-03, Available at SSRN: https://ssrn.com/abstract=1759405 or http://dx.doi.org/10.2139/ssrn.1759405

Michael Greenstone

University of Chicago - Department of Economics

1126 East 59th Street
Chicago, IL 60637
United States

Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Chad Syverson (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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