Pollution Abatement Costs, Regulation, and Plant-Level Productivity

32 Pages Posted: 22 Sep 2000 Last revised: 26 Aug 2022

See all articles by Wayne B. Gray

Wayne B. Gray

Clark University - Department of Economics; National Bureau of Economic Research (NBER)

Ronald J. Shadbegian

University of Massachusetts at Dartmouth; U.S. Environmental Protection Agency (EPA)

Date Written: January 1995

Abstract

We analyze the connection between productivity, pollution abatement expenditures, and other measures of environmental regulation for plants in three industries (paper, oil, and steel). We examine data from 1979 to 1990, considering both total factor productivity levels and growth rates. Plants with higher abatement cost levels have significantly lower productivity levels. The magnitude of the impact is somewhat larger than expected: $1 greater abatement costs appears to be associated with the equivalent of $1.74 in lower productivity for paper mills, $1.35 for oil refineries, and $3.28 for steel mills. However, these results apply only to variation across plants in productivity levels. Estimates looking at productivity variation within plants over time, or estimates using productivity growth rates show a smaller (and insignificant) relationship between abatement costs and productivity. Other measures of environmental regulation faced by the plants (compliance status, enforcement activity, and emissions) are not significantly related to productivity.

Suggested Citation

Gray, Wayne B. and Shadbegian, Ronald J., Pollution Abatement Costs, Regulation, and Plant-Level Productivity (January 1995). NBER Working Paper No. w4994, Available at SSRN: https://ssrn.com/abstract=226592

Wayne B. Gray (Contact Author)

Clark University - Department of Economics ( email )

950 Main Street
Worcester, MA 01610
United States
708-793-7693 (Phone)
708-793-8849 (Fax)

National Bureau of Economic Research (NBER)

Ronald J. Shadbegian

University of Massachusetts at Dartmouth ( email )

North Dartmouth, MA 02747
United States

U.S. Environmental Protection Agency (EPA) ( email )

Ariel Rios Building
1200 Pennsylvania Ave., N.W.
Washington, DC 20460
United States

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