TY  - JOUR
AU  - Berman,Eli
AU  - Bui,Linda T.M.
TI  - Environmental Regulation and Productivity:  Evidence from Oil Refineries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6776
PY  - 1998
Y2  - November 1998
UR  - http://www.nber.org/papers/w6776
L1  - http://www.nber.org/papers/w6776.pdf
N1  - Author contact info:
Eli Berman
Department of Economics, 508
University of California, San Diego
9500 Gilman Drive
La Jolla, CA  92093
Tel: 858/534-2858
Fax: 858/534-7040
E-Mail: elib@ucsd.edu
AB  - We examine the effect of air quality regulation on the productivity of some of  the most heavily regulated manufacturing plants in the United States, the oil refineries of the Los Angeles (South Coast) Air Basin.  We use direct measures of local air pollution regulation in this region to estimate their effects on abatement investment.  Refineries not subject to these local environmental regulations are used as a comparison group.  We study the period of increased regulation between 1979 and 1992.  On average each regulation cost $3M per plant on compliance dates and a further $5M per plant on dates of increased stringency.  We also construct measures of total factor productivity using plant level data which allow us to observe physical quantities of inputs and outputs for the entire population of refineries. Despite the high costs associated with the local regulations, productivity in the Los Angeles Air Basin refineries rose sharply during the 1987 - 1992 period, a period of decreased refinery productivity in other regions.  We conclude that measures of the cost of environmental regulation may be significantly overstated.  The gross costs may be far greater than the net cost, as abatement may be productive.
ER  -