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The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing

January 2011

Abstract

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The 10 most similar working papers to the working paper 'The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing' are listed below in order of similarity.

• Working Paper

  🔥

  
  
  Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices
  

  July 2006

  Authors: Chad Syverson, Ali Hortacsu

  Working Paper Number:

  CES-06-21

  This paper looks at the reasons for and results of vertical integration, with specific regard to its possible effects on market power as proposed in the theoretical literature on foreclosure. It uses a rich data set on producers in the cement and ready-mixed concrete industries over a 34- year period to perform a detailed case study. There is little evidence that foreclosure effects are quantitatively important in these industries. Instead, prices fall, quantities rise, and entry rates remain unchanged when markets become more integrated. We suggest an alternative mechanism that is consistent with these patterns and provide additional evidence in support of it: namely, that higher productivity producers are more likely to vertically integrate, and as has been documented elsewhere, are also larger, more likely to grow and survive, and charge lower prices. We explore possible sources of vertically integrated producers' productivity advantage and find that the advantage is tied to firm size, possibly in part through improved logistics coordination, but not to several other possible explanations.
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• Working Paper

  🔥

  
  
  Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices
  

  December 2008

  Authors: Chad Syverson, Ali Hortacsu

  Working Paper Number:

  CES-08-41

  This paper empirically investigates the possible market power effects of vertical integration proposed in the theoretical literature on vertical foreclosure. It uses a rich data set of cement and ready-mixed concrete plants that spans several decades to perform a detailed case study. There is little evidence that foreclosure is quantitatively important in these industries. Instead, prices fall, quantities rise, and entry rates remain unchanged when markets become more integrated. These patterns are consistent, however, with an alternative efficiency-based mechanism. Namely, higher productivity producers are more likely to vertically integrate and are also larger, more likely to survive, and charge lower prices. We find evidence that integrated producers' productivity advantage is tied to improved logistics coordination afforded by large local concrete operations. Interestingly, this benefit is not due to firms' vertical structures per se: non-vertical firms with large local concrete operations have similarly high productivity levels.
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• Working Paper

  
  
  Costs of Air Quality Regulation
  

  July 1999

  Authors: Randy Becker, J. Vernon Henderson

  Working Paper Number:

  CES-99-09

  This paper explores some costs associated with environmental regulation. We focus on regulation pertaining to ground-level- ozone (O) and its effects on two manufacturing industries - industrial organic chemicals (SIC 2865-9) and miscellaneous plastic products (SIC 308). Both are major emitters of volatile organic compounds (VOC) and nitrogen oxides (NO), the chemical precursors to ozone. Using plant-level data from the Census Bureau's Longitudinal Research Database (LRD), we examine the effects of regulation on the timing and magnitudes of investments by firms and on the impact it has had on their operating costs. As an alternative way to assess costs, we also employ plant-level data from the Pollution Abatement Costs and Expenditures (PACE) survey. Analyses employing average total costs functions reveal that plants' production costs are indeed higher in (heavily-regulated) non-attainment areas relative to (less-regulated) attainment areas. This is particularly true for younger plants, consistent with the notion that regulation is most burdensome for new (rather existing) plants. Cost estimates using PACE data generally reveal lower costs. We also find that new heavily-regulated plants start out much larger than less-regulated plants, but then do not invest as much. Among other things, this highlights the substantial fixed costs involved in obtaining expansion permits. We also discuss reasons why plants may restrict their size.
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• Working Paper

  
  
  ENVIRONMENTAL REGULATION AND INDUSTRY EMPLOYMENT: A REASSESSMENT
  

  July 2013

  Authors: Wayne B Gray, Richard D. Morgenstern, Anna Belova, Joshua Linn

  Working Paper Number:

  CES-13-36

  This paper examines the impact of environmental regulation on industry employment, using a structural model based on data from the Census Bureau's Pollution Abatement Costs and Expenditures Survey. This model was developed in an earlier paper (Morgenstern, Pizer, and Shih (2002) - MPS). We extend MPS by examining additional industries and additional years. We find widely varying estimates across industries, including many implausibly large positive employment effects. We explore several possible explanations for these results, without reaching a satisfactory conclusion. Our results call into question the frequent use of the average impacts estimated by MPS as a basis for calculating the quantitative impacts of new environmental regulations on employment.
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• Working Paper

  
  
  Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?
  

  September 2005

  Authors: John Haltiwanger, Lucia Foster, Chad Syverson

  Working Paper Number:

  CES-05-11

  There is considerable evidence that producer-level churning contributes substantially to aggregate (industry) productivity growth, as more productive businesses displace less productive ones. However, this research has been limited by the fact that producer-level prices are typically unobserved; thus within-industry price differences are embodied in productivity measures. If prices reflect idiosyncratic demand or market power shifts, high 'productivity' businesses may not be particularly efficient, and the literature's findings might be better interpreted as evidence of entering businesses displacing less profitable, but not necessarily less productive, exiting businesses. In this paper, we investigate the nature of selection and productivity growth using data from industries where we observe producer-level quantities and prices separately. We show there are important differences between revenue and physical productivity. A key dissimilarity is that physical productivity is inversely correlated with plant-level prices while revenue productivity is positively correlated with prices. This implies that previous work linking (revenue-based) productivity to survival has confounded the separate and opposing effects of technical efficiency and demand on survival, understating the true impacts of both. We further show that young producers charge lower prices than incumbents, and as such the literature understates the productivity advantage of new producers and the contribution of entry to aggregate productivity growth.
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• Working Paper

  
  
  What Determines Environmental Performance at Paper Mills? The Roles of Abatement Spending, Regulation, and Efficiency
  

  April 2003

  Authors: Wayne B Gray, Ronald J Shadbegian

  Working Paper Number:

  CES-03-10

  This paper examines the determinants of environmental performance at paper mills, measured by air pollution emissions per unit of output. We consider differences across plants in air pollution abatement expenditures, local regulatory stringency, and productive efficiency. Emissions are significantly lower in plants with a larger air pollution abatement capital stock: a 10 percent increase in abatement capital stock appears to reduce emissions by 6.9 percent. This translates into a sizable social return: one dollar of abatement capital stock is estimated to provide and annual return of about 75 cents in pollution reduction benefits. Local regulatory stringency and productive efficiency also matter: plants in non-attainment counties have 43 percent lower emissions and plants with 10 percent higher productivity have 2.5 percent lower emissions. For pollution abatement operating costs we find (puzzlingly) positive, but always insignificant, coefficients.
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• Working Paper

  
  
  How Does State-Level Carbon Pricing in the United States Affect Industrial Competitiveness?
  

  June 2020

  Authors: Wayne B Gray, Richard D. Morgenstern, Joshua Linn, Brendan Casey

  Working Paper Number:

  CES-20-21

  Pricing carbon emissions from an individual jurisdiction may harm the competitiveness of local firms, causing the leakage of emissions and economic activity to other regions. Past research concentrates on national carbon prices, but the impacts of subnational carbon prices could be more severe due to the openness of regional economies. We specify a flexible model to capture competition between a plant in a state with electric sector carbon pricing and plants in other states or countries without such pricing. Treating energy prices as a proxy for carbon prices, we estimate model parameters using confidential plant-level Census data, 1982'2011. We simulate the effects on manufacturing output and employment of carbon prices covering the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and Mid-Atlantic regions. A carbon price of $10 per metric ton on electricity output reduces employment in the regulated region by 2.7 percent, and raises employment in nearby states by 0.8 percent, although these estimates do not account for revenue recycling in the RGGI region that could mitigate these employment changes. The effects on output are broadly similar. National employment falls just 0.1 percent, suggesting that domestic plants in other states as opposed to foreign facilities are the principal winners from state or regional carbon pricing.
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• Working Paper

  
  
  Environmental Regulation And Manufacturing Productivity At The Plant Level
  

  March 1993

  Authors: Wayne B Gray, Ronald J Shadbegian

  Working Paper Number:

  CES-93-06

  This paper presents results for an analysis of plant-level data from three manufacturing industries (paper, oil, and steel). We combine productivity data from the Longitudinal Research Database ( LRD ) with pollution abatement expenditures from the Census Bureau's Pollution Abatement Cost and Expenditures (PACE) survey, as well as regulatory measures taken from datasets maintained by the Environmental Protection Agency. We use data from 1979 to 1985, considering both labor and total factor productivity, both levels and growth rates, and both annual measures and averages over the period. We find a strong connection between regulation and productivity when regulation is measured by compliance costs. More regulated plants have significantly lower productivity levels and slower productivity growth rates than less regulated plants. The magnitude of the impacts are larger than expected: a $1 increase in compliance costs appears to reduce TFP by the equivalent of $3 to $4. Thus, commonly used methods of calculating the impact of regulation on productivity are substantially underestimated. These results are generally consistent across industries and for different estimation methods. Our other measures of regulation (compliance status, enforcement activity, and emissions) show much less consistent results. Higher enforcement, lower compliance, and higher emissions are generally associated with lower productivity levels and slower productivity growth, but the coefficients are rarely significant.
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• Working Paper

  
  
  The Impact of Heterogeneous NOx Regulations on Distributed Electricity Generation in U.S. Manufacturing
  

  April 2015

  Authors: Jonathan M. Lee

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  CES-15-12

  The US EPA's command-and-control NOx policies of the early 1990s are associated with a 3.1 percentage point reduction in the likelihood of manufacturing plants vertically integrating the electricity generation process. During the same period California adopted a cap-and-trade program for NOx emissions that resulted in no significant impact on distributed electricity generation in manufacturing. These results suggest that traditional command-and-control approaches to air pollution may exacerbate other market failures such as the energy efficiency gap, because distributed generation is generally recognized as a more energy efficient means of producing electricity
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• Working Paper

  
  
  Technology Lock-In and Costs of Delayed Climate Policy
  

  July 2023

  Authors: Jonathan T. Hawkins-Pierot, Katherine R. H. Wagner

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  CES-23-33

  This paper studies the implications of current energy prices for future energy efficiency and climate policy. Using U.S. Census microdata and quasi-experimental variation in energy prices, we first show that manufacturing plants that open when electricity prices are low consume more energy throughout their lifetime, regardless of current electricity prices. We then estimate that a persistent bias of technological change toward energy can explain the long-term effects of entry-year electricity prices on energy intensity. Overall, this 'technology lock-in' implies that increasing entry-year electricity prices by 10% would decrease a plant's energy intensity of production by 3% throughout its lifetime.
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