JT03367927Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ECO/WKP(2014) Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.Comments on Working Papers are welcomed, and may be sent to OECD Economics Department, 2 rue André-Pascal, 75775 Paris Cedex 16, France, or by e-mail to eco.contact@oecd.org This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
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ABSTRACT/RÉSUMÉEmpirical evidence on the effects of environmental policy stringency on productivity growth This paper investigates the impact of changes in the stringency of environmental policies on productivity growth in OECD countries. Using a new environmental policy stringency (EPS) index, it estimates a reduced-form model of multi-factor productivity growth, where the effect of countries' environmental policies varies with pollution intensity of the industry and technological advancement. A multi-layer analysis provides insights at the aggregate economy, the industry and the firm level. At the aggregate economy level, a negative effect on productivity growth is found one year ahead of the policy change. This negative "announcement effect" is offset within three years after the implementation. At the industry level, a tightening of environmental policy is associated with a short-term increase in industry-level productivity growth, for the most technologically advanced country-industry pairs. This effect diminishes with the distance to the global productivity frontier, becoming insignificant at larger distances. At the firm level, only the technologically most advanced firms show a positive effect on productivity growth from a tightening of environmental policies, while a third of firms, the less productive ones, experience a productivity slowdown.JEL classification codes: O47, O44, Q50, Q58.