Plant Vintage, Technology, and Environmental Regulation

27 Pages Posted: 17 Sep 2001 Last revised: 4 Sep 2022

See all articles by Wayne B. Gray

Wayne B. Gray

Clark University - Department of Economics; National Bureau of Economic Research (NBER)

Ronald J. Shadbegian

University of Massachusetts at Dartmouth; U.S. Environmental Protection Agency (EPA)

Date Written: September 2001

Abstract

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.

Suggested Citation

Gray, Wayne B. and Shadbegian, Ronald J., Plant Vintage, Technology, and Environmental Regulation (September 2001). NBER Working Paper No. w8480, Available at SSRN: https://ssrn.com/abstract=283352

Wayne B. Gray (Contact Author)

Clark University - Department of Economics ( email )

950 Main Street
Worcester, MA 01610
United States
708-793-7693 (Phone)
708-793-8849 (Fax)

National Bureau of Economic Research (NBER)

Ronald J. Shadbegian

University of Massachusetts at Dartmouth ( email )

North Dartmouth, MA 02747
United States

U.S. Environmental Protection Agency (EPA) ( email )

Ariel Rios Building
1200 Pennsylvania Ave., N.W.
Washington, DC 20460
United States

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