Wednesday, September 26, 2012

How Much Do Environmental Regulations Cost?

See the interesting post at Freakonomics. It mentions a paper by Michael Greenstone, John List, and Chad Syverson. Here is the abstract:
"The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, stricter air quality regulations are associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly large negative effects on productivity, though effects are also evident among particulates and sulfur dioxide emitters. Carbon monoxide regulations, on the other hand, appear to increase measured TFP, especially among refineries. The application of corrections for the confounding of price increases and output declines and sample selection on survival produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, about 8.8 percent of manufacturing sector profits in this period."
Here is something I report in my microeconomics class:
"Thomas Hopkins at the Rochester Institute of Technology determined that the cost of all regulations over each year is about 8% of national income. The total cost from compliance and administration of both Economic and Social regulation, including state, local and federal levels, is more than $1 trillion annually (From the book Economics Today by Roger LeRoy Miller, 15e)"

No comments: