Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192356 
Year of Publication: 
2004
Series/Report no.: 
Discussion Papers No. 374
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Many economists maintain that environmental regulations hamper productivity growth. However, recently, an opposing view has gained advocates. Indeed, it has been suggested that the empirically detected inverse relationship between environmental regulations and productivity growth is an almost inevitable consequence of the current methods used to measure productivity - methods that fail to account for improvements in environmental performance. We apply a method that amends this methodological shortcoming of previous empirical studies, and perform a regression analysis of regulatory stringency and a measure of productivity growth that accounts for emission reductions. To credit a firm for emission reductions, we include emissions as inputs when calculating the Malmquist productivity index (EMI); and for the sake of comparison, we also calculate the traditional Malmquist productivity index (MI) where emissions are not included. The regression analysis shows that the sign of the relationship is positive when EMI is employed as measure of productivity growth; but not statistically different from zero when MI is applied. Hence, the present paper provides the first empirical support for the claim that evaluations or recommendations of environmental policies that are based on a traditional measure of total factor productivity can be biased.
Subjects: 
Environmental regulation
Productivity
Malmquist index
JEL: 
Q28
D24
Q25
L60
Document Type: 
Working Paper

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