OECD Economics Department Working Papers

ISSN: 
1815-1973 (online)
DOI: 
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

Empirical Evidence on the Effects of Environmental Policy Stringency on Productivity Growth You or your institution have access to this content

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Author(s):
Silvia Albrizio1, Tomasz Koźluk1, Vera Zipperer1
Author Affiliations
  • 1: OECD, France

04 Dec 2014
Bibliographic information
No.:
1179
Pages:
48
DOI: 
10.1787/5jxrjnb36b40-en

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This paper investigates the impact of changes in the stringency of environmental policies on productivity growth in OECD countries. Using a new environmental policy stringency (EPS) index, it estimates a reduced-form model of multi-factor productivity growth, where the effect of countries' environmental policies varies with pollution intensity of the industry and technological advancement. A multi-layer analysis provides insights at the aggregate economy, the industry and the firm level. At the aggregate economy level, a negative effect on productivity growth is found one year ahead of the policy change. This negative “announcement effect” is offset within three years after the implementation. At the industry level, a tightening of environmental policy is associated with a short-term increase in industry-level productivity growth, for the most technologically advanced country-industry pairs. This effect diminishes with the distance to the global productivity frontier, becoming insignificant at larger distances. At the firm level, only the technologically most advanced firms show a positive effect on productivity growth from a tightening of environmental policies, while a third of firms, the less productive ones, experience a productivity slowdown.
Keywords:
multifactor productivity, environmental policy stringency, environmental regulations, environmental policies, Porter hypothesis
JEL Classification:
  • O44: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Environment and Growth
  • O47: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence
  • Q50: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Environmental Economics / General
  • Q58: Agricultural and Natural Resource Economics ; Environmental and Ecological Economics / Environmental Economics / Government Policy
 
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