ABSTRACT
We analyze the connection between productivity, pollution abatement expenditures, and
other measures of environmental regulation for plants in three industries (paper, oil, and steel).
We examine daia from 1979 to 1990, considering both total factor productivity levels and growth
rates. Plants with higher abatement cost levels have significantly lower productivity levels. The
magnitude of the impact is somewhat larger than expected: $1 greater abatement costs appears
to be associated with the equivalent of $1.74 in lower productivity for paper mills, $1.35 for oil
refineries, and $3.28 for steel mills. However, these results apply only to variation across plants
in productivity levels. Estimates looking at productivity variation within plants over time, or
estimates using productivity growth rates show a smaller (and insignificant) relationship between
abatement costs and productivity. Other measures of environmental regulation faced by the
plants (compliance status, enforcement activity, and emissions) are not significandy related to
productivity.
