The Porter Hypothesis at 20:  The Effect of Environmental Regulation (ER)  on Productivity and Competitiveness   Wayne Gra...
Research Background <ul><li>Joint work with Ronald Shadbegian, EPA-NCEE </li></ul><ul><li>Plant-level datasets for manufac...
ER and Productivity in the 1970s <ul><li><World Congress paper, 2010> </li></ul><ul><li>Pessimal (?) regulatory approach <...
Investment and Technology Choice <ul><li><Journal of Industrial Economics, 1998> </li></ul><ul><li>Pulp and paper mills </...
Heterogeneity or Causality? <ul><li><Journal of Productivity Analysis, 2005> </li></ul><ul><li>Paper, oil, and steel indus...
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Wayne Gray Presentation - The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? June 2010

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Session 4: Effect of Environmental Regulation on Productivity and Competitiveness

Wayne Gray

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Wayne Gray Presentation - The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? June 2010

  1. 1. The Porter Hypothesis at 20: The Effect of Environmental Regulation (ER) on Productivity and Competitiveness   Wayne Gray Economics Department, Clark University Porter at 20 - June-28-2010
  2. 2. Research Background <ul><li>Joint work with Ronald Shadbegian, EPA-NCEE </li></ul><ul><li>Plant-level datasets for manufacturing industries </li></ul><ul><li>U.S. Census Bureau data </li></ul><ul><ul><li>Inputs, output, productivity </li></ul></ul><ul><ul><li>Pollution Abatement Costs and Expenditures survey </li></ul></ul><ul><ul><li>Investment, age </li></ul></ul><ul><li>EPA data </li></ul><ul><ul><li>Enforcement and compliance </li></ul></ul><ul><ul><li>Emissions </li></ul></ul>Porter at 20 - June-28-2010
  3. 3. ER and Productivity in the 1970s <ul><li><World Congress paper, 2010> </li></ul><ul><li>Pessimal (?) regulatory approach </li></ul><ul><ul><li>Prescriptive and inflexible </li></ul></ul><ul><ul><li>Emphasis on end-of-pipe controls </li></ul></ul><ul><ul><li>Uncertainty, new regulations </li></ul></ul><ul><li>Paper, oil, and steel industries </li></ul><ul><li>Negative impacts of ER on productivity </li></ul><ul><li>Worse for high R&D, high productivity plants </li></ul><ul><ul><li>Possibly more affected by inflexibility of regulations? </li></ul></ul>Porter at 20 - June-28-2010
  4. 4. Investment and Technology Choice <ul><li><Journal of Industrial Economics, 1998> </li></ul><ul><li>Pulp and paper mills </li></ul><ul><li>Abatement capital investment “crowds out” productive capital </li></ul><ul><ul><li>May reflect capital budgeting at the plant level </li></ul></ul><ul><ul><li>Possible offset - “abatement” capital also seems to contribute to output (unlike other abatement inputs) </li></ul></ul><ul><li>ER affects production technology choices </li></ul><ul><ul><li>Stringent air regs -> don’t use air-polluting technology </li></ul></ul>Porter at 20 - June-28-2010
  5. 5. Heterogeneity or Causality? <ul><li><Journal of Productivity Analysis, 2005> </li></ul><ul><li>Paper, oil, and steel industries </li></ul><ul><li>Stochastic frontier, both emissions and production </li></ul><ul><li>Higher abatement costs = less efficient on both </li></ul><ul><li>But, production and abatement efficiency measures are positively correlated </li></ul><ul><li>Possible heterogeneity in management quality </li></ul><ul><ul><li>Better managers choose lower-cost abatement methods </li></ul></ul><ul><ul><li>Better managers produce more efficiently and cleaner </li></ul></ul>Porter at 20 - June-28-2010
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