Environmental Abatement Costs and Establishment Size

Abstract

The impact of environmental abatement costs on the size distribution of manufacturing establishments in pollution‐intensive industries is analyzed. Utilizing both state‐ and industry‐specific measures of environmental regulation, a new and important interaction is discovered: Establishment size increases with state environmental abatement costs, but only in industries during periods of relatively high (national) pollution abatement intensity. Increased state environmental stringency during times when similar industries located in other states are not undertaking sufficient abatement expenditures leads to a decrease in establishment size. (JEL L11, L51, R38)

Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey

“…In general, Evans finds evidence of diseconomies of scale in pollution abatement, with 375 of the 403 industries exhibiting diseconomies of scale, 214 of which are statistically significant. Hartman et al (1997), Dean et al (2000), and Millimet (2003) all find evidence that small businesses are disproportionately impacted by pollution abatement costs. In particular, Hartman et al (1997), in their study of regulatory compliance costs of U.S. manufacturing from 1979-1985, find some evidence of declining average and marginal costs of abatement with increased volume of abated pollutants.…”

“…According to the Pollution Abatement Costs and Expenditures (PACE) survey, the U.S. manufacturing sector spent nearly $21 billion dollars on pollution abatement operating costs (PAOC) to comply with environmental regulations in 2005 (U.S. Census Bureau 2008). Policymakers are especially interested in how these regulations affect the economy, and there is a growing literature on the effects of environmental regulations on various plant-level outcomes, including productivity (Berman and Bui 2001a;Gray and Shadbegian 2002, 2003, 2006Shadbegian and Gray 2005;Becker 2011b;Greenstone, List, and Syverson 2012), investment (Gray and Shadbegian 1998), location (Becker and Henderson 2000;List et al 2003) and employment (Berman and Bui 2001b;Morgenstern, Pizer, and Shih 2002;and Greenstone 2002).…”

The environmental consequences of trade: Evidence from subnational trade flows

“…6 For example, Henderson and Kumbhakar [18] document positive effects of state-level public capital on GSP. may lead to spurious correlation by affecting productivity, as suggested by the Porter hypothesis [27], or innovation [24].…”

The Promise and Limits of Voluntary Management-Based Regulatory Reform: An Analysis of EPA's Strategic Goals Program

“…As a number of 19 See also Heckler & LaGrotta 2000, reporting that reducing the self-sampling frequency for New York empirical studies have shown (Millimet 2003), pollution prevention and control expenditures increase the minimum efficient scale of facilities. As the experience of the metal finishing SGP confirms, the burden of such costs is often too much for small firms to be able to finance.…”