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.

 

Environmental Policies and Productivity Growth

A Critical Review of Empirical Findings You or your institution have access to this content

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

Publication Date
19 Nov 2013
Bibliographic information
No.:
1096
Pages
38
DOI
10.1787/5k3w725lhgf6-en

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The economic effects of environmental policies are of central interest to policymakers. The traditional approach sees environmental policies as a burden on economic activity, at least in the short to medium term, as they raise costs without increasing output and restrict the set of production technologies and outputs. In contrast, the Porter Hypothesis claims that well-designed environmental policies can provide a ‘free lunch’ – encouraging innovation, bringing about gains in profitability and productivity that can outweigh the costs of the policy. This paper reviews the empirical evidence on the link between environmental policy stringency and productivity growth, and the various channels through which such effects can take place. The results are ambiguous, in particular as many of the studies are fragile and context-specific, impeding the generalisation of conclusions. Practical problems related to data, measurement and estimation strategies are discussed, leading to suggestions how they can be addressed in future research. These include: improving the measurement of environmental policy stringency; investigating into effects of different types of instruments and details of instrument design; exploiting cross-country variation; and the complementary use of different levels of aggregation.
Keywords:
Porter hypothesis, environmental policy, productivity, innovation
JEL Classification:
  • D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • O31: Economic Development, Technological Change, and Growth / Technological Change; Research and Development; Intellectual Property Rights / Innovation and Invention: Processes and Incentives
  • O47: Economic Development, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
  • Q50: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / General
  • Q55: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Technological Innovation
  • Q58: Agricultural and Natural Resource Economics; Environmental and Ecological Economics / Environmental Economics / Government Policy