Environmental policies and productivity growth: Evidence across industries and firms |
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| Institution: | 1. Economics Department, Organisation of Economic Co-operation and Development (OECD), France;2. Economics Department/Environment Directorate, Organisation of Economic Co-operation and Development (OECD), France;3. DIW Berlin, Germany;1. Department of Economics, University of Calgary, 2500 University Drive NW, Calgary, Alberta, Canada T2N1N4;2. Energy and Environmental Policy, The School of Public Policy, University of Calgary, Canada;1. Wuhan University, Economics and Management School, China;2. Wuhan University, Institute for the Development of Central China, China;1. Centre for International Trade and Development, School of International Studies, Jawaharlal Nehru University, New Delhi 110067, India;2. Indian School of Business, Knowledge City, Sector 81, SAS Nagar, Mohali, Punjab 140306, India;1. School of Business, Central South University of Forestry and Technology, Changsha 410004, PR China;2. School of Business, Central South University, Changsha 410083, PR China;1. Department of Economics, Antai College of Economics and Management, Shanghai Jiao Tong University, 1954 Huashan Road, Shanghai, 200030, China;2. Department of Applied Economics, Oregon State University, Corvallis, OR 97331, USA;3. State Key Laboratory of Pollution Control & Resource Reuse, School of Environment, Nanjing University, Nanjing, 210023, China |
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| Abstract: | This paper investigates the impact of changes in environmental policy stringency on industry- and firm-level productivity growth in a panel of OECD countries. To test the strong version of the Porter Hypothesis (PH), we extend a neo-Schumpeterian productivity model to allow for effects of environmental policies. We use a new environmental policy stringency (EPS) index and let the effect of countries? environmental policies vary with the pollution intensity of the industry and with the countries’ and firms’ technological advancement. A tightening of environmental policy is associated with a short-term increase in industry-level productivity growth in the most technologically-advanced countries. This effect diminishes with the distance to the global productivity frontier, eventually becoming insignificant. For the average firm, no evidence of PH is found. However, the most productive firms see a temporary boost in productivity growth, while the less productive ones experience a productivity slowdown. |
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| Keywords: | Environmental policy stringency Environmental regulation Porter Hypothesis Multifactor productivity |
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