What is the environmental performance of firms overseas? An empirical investigation of the global gold mining industry

Abstract

Using a large plant level data set, this paper carries out an econometric analysis of the environmental performance of multinational …rms in the gold mining industry worldwide. The aim of the analysis is to determine if, by looking at the actual environmental performance of …rms (as opposed to inferring such behavior from location decisions), we can shed any light on important questions in the literature on …rm location decisions: Do pollution havens exist in the gold mining industry? Do foreign controlled gold mines perform environmentally worse or better than their domestic counterparts? We develop di¤erent ways of measuring environmental performance within the context of a Bayesian stochastic production frontier approach. In particular, we derive di¤erent ways of measuring technical and environmental e¢ ciency. When we implement these methods in our empirical work, we …nd that results are robust across di¤erent models and ways of measuring e¢ ciency. We …nd that gold mines exhibit a wide range of environmental e¢ ciencies; some are clearly more e¢ cient than others, in other words. However, and most importantly for our questions, we …nd that this variation in e¢ ciencies cannot be systematically related to mine characteristics such as whether they are foreign or domestically controlled or whether they are located in developed or developing countries.Keywords: Bayesian stochastic frontier analysis; e¢ ciency; environmental regulations and plant performance; pollution havens; regulatory chill; gold mining.JEL Classi…cation: Q3, Q56, C11, C23. 2This paper attempts to shed light on important economic and environmental policy questions as: Do …rms operating in developing countries behave di¤erently from those operating in developed countries? Do foreign controlled …rms exhibit di¤erent environmental performance from domestically controlled ones?The answers to these questions have immense economic, welfare and environmental implications for rich and poor countries alike. In this paper, we address these questions using a new data set of gold mines worldwide. From a …rm decision and environmental perspective, the gold mining industry provides an important case study for analysis of these questions: a) It is truly global in the extent of its reach. b) It produces substantial environmental pollution and degradation in comparison to other types of economic activity. Recently, there has been much public concern over and media interest in the environmental costs of gold production, especially in the developing world. For example, the New York Times has recently run a series of articles on the environmental and social impacts of multinational gold mining …rms (see New York Times 2006a,b; 2005a,b,c). It alleges that many …rms -a large number of them Fortune 500 …rms -are breaching national environmental regulations, causing serious pollution and environmental degradation in the process. These claims have been vigorously denied by the companies themselves. In response to the accusations, the world's largest gold pr...

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Mine Performance Assessment by Means of Stochastic Frontier Analysis

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