Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278584 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2820
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper analyses the impact of changes in environmental regulations on productivity growth at country- and firm-level. We exploit several data sources and the environmental policy stringency index, to evaluate the Porter hypothesis, according to which firms' productivity can benefit from more stringent environmental policies. By using panel local projections, we estimate the regulatory impact over a five-year horizon. The identification of causal impacts of regulatory changes is achieved by the estimation of firms' CO2 emissions via a machine learning algorithm. At country- and firm-level, policy tightening affects high-polluters' productivity negatively and stronger than their less-polluting peers. However, among high-polluting firms, large ones experience positive total factor productivity growth due to easier access to finance and greater innovativeness. Hence, we do not find support for the Porter hypothesis in general. However for technology support policies and firms with the required resources, policy tightening can enhance productivity.
Subjects: 
Environmental regulation
Emissions
Porter hypothesis
Productivity
Euro Area
JEL: 
O44
Q52
Q58
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6083-0
Document Type: 
Working Paper

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