Plant Vintage, Technology, and Environmental Regulation

By W. Gray, Ronald J. Shadbegian. 2001

615 citations recorded by the source corpus.

Does the impact of environmental regulation differ by plant vintage and technology? We answer this question using annual Census Bureau information on 116 pulp and paper mills' vintage, technology, productivity, and pollution abatement operating costs for 1979-1990. We find a significant negative relationship between pollution abatement costs and productivity levels. This is due almost entirely to integrated mills (those incorporating a pulping process), where a one standard deviation increase in abatement costs is predicted to reduce productivity by 5.4 percent. Older plants appear to have lower productivity but are less sensitive to abatement costs, perhaps due to 'grandfathering' of regulations. Mills which undergo renovations are also less sensitive to abatement costs, although these vintage and renovation results are not generally significant. We find similar results using a log-linear version of a three input Cobb-Douglas production function in which we include our technology, vintage, and renovation variables. Sample calculations of the impact of pollution abatement on productivity show the importance of allowing for differences based on plant technology. In a model incorporating technology interactions we estimate that total pollution abatement costs reduce productivity levels by an average of 4.7 percent across all the plants. The comparable estimate without technology interactions is 3.3 percent, approximately 30% lower.

View Paper: https://www.semanticscholar.org/paper/f21df34e95176446ed31e671e682f2f94217398a

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

Citations in the corpus

Environmental policies and productivity growth: a critical review of empirical findings (2015, background): “Greenstone et al. (2012) show that the negative estimated effects of environmental policies on productivity are actually larger when adjusted for the fact that most inefficient firms drop out of the sample as a result of the environmental laws.”
The Impacts of Environmental Regulations on Competitiveness (2017, background): “More recently, Gray and Shadbegian (2003) found a link between higher pollution-abatement operating costs and lower productivity in 116 pulp and paper plants.”
Determinants of total factor productivity : a literature review (2007, background): “73 Gray and Shadbegian (2003) analyse the effect of environmental regulation on productivity in the pulp and paper industry in the U.S., a heavily air- and water-polluting industry, between 1979 and 1990.”
Environmental policy without costs? : A review of the Porter hypothesis (2009, result): “Later studies have, in part, confirmed these results (Gray and Shadbegian, 2003) However, there are a few studies that show a somewhat different result.”
Assessing the Impact of Formal and Informal Regulations on Environmental and Economic Performance of Brazilian Manufacturing Firms (2012, background): “(5)Working on a sample of plants in the pulp and paper industry, Gray and Shadbegian (2003) find among others that total pollution abatement costs reduce productivity by an average 4.”
Do environmental regulations hamper productivity growth? How accounting for improvements of plants' environmental performance can change the conclusion (2007, background): “2 Gray and Shadbegian (2003) is related to Gray and Shadbegian (1993, 2002) and the results indicate a negative relationship between compliance costs and productivity (see also e.g. Shadbegian and Gray, 2005, 2003; Boyd and McClelland, 1999).”
Exporters and the environment (2016, unknown): “Gray and Shadbegian (2003) show a relationship between plant productivity, plant vintage and environmental performance in the pulp and paper industry. The primary channel is through technology choice which appears to vary with vintage. Heutel (2011) shows that grandfathering of environmental regulat”
Environmental regulations, innovation and firm performance: A revisit of the Porter hypothesis (2017, background): “Environmental regulations can play an important role in limiting the harmful effects of economic activity on the natural environment; however, they can also impose a significant cost on businesses (Blackman et al., 2010; Filbeck and Gorman, 2004; Gray and Shadbegian, 2003).”
Impact of corruption in public sector on environmental quality: Implications for sustainability in BRICS and next 11 countries (2019, background): “The reduction in the rigour of environmental laws might be associated with environmental degradation, and various researchers have identified this issue (Lucas et al., 1992; Gray and Shadbegian, 2003; Reijnders, 2003; Ren et al., 2018; Yang et al., 2018).”
Environmental regulations, induced R&D, and productivity: Evidence from Taiwan's manufacturing industries (2012, unknown): “This result is consistent with earlier findings by Brunnermeier and Cohen (2003) and Gray and Shadbegian (2003), that stronger environmental regulations do stimulate firms to increase their R&D investment.”