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The effect of environmental regulations: a restricted cost function for Korean manufacturing industries

Published online by Cambridge University Press:  29 January 2007

MYUNGHUN LEE
MYUNGHUN LEE
Affiliation:
Department of International Trade, Inha University, 253 Yonghyun-dong, Nam-gu, Incheon, 402-751 Korea. Phone no.: +82-32-860-7805; Fax no.: +82-32-876-9328; E-mail: [email protected]
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Abstract

Environmental conservation requires society to consider the trade-off between allocating resources to productive activities and pollution control activities. Therefore, it is informative to measure the effect of environmental regulations on firms' productivity. This paper attempts to estimate the impact of environmental regulations on Korean manufacturing industries. Despite being key inputs in the manufacturing process, raw materials have often been excluded from the cost function due to the lack of price data. A restricted cost function is used to improve the reliability of parameter estimates. Empirical results indicate that environmental regulations caused a 12 percent decline in the average annual rate of productivity growth over the period 1982–93.

Type
Research Article
Information
Environment and Development Economics , Volume 12 , Issue 1 , February 2007 , pp. 91 - 104
Copyright
© 2007 Cambridge University Press

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