OSHA, EPA regulations, and productivity in U.S. manufacturing industries

The goal of this research is to reassess the impact of environmental regulation on economic performances in the U.S. manufacturing sector. The whole debate in the literature about the relationship between industrial productivity and environmental regulations has started since the1970’s, the first years to experience the co-existence of slowdown in productivity growth in the U.S. economy and the introduction of public environmental regulations in an unprecedented massive scale. Some people (even if they are not economists) argue that regulation is costless. My paper attempts to test this very “null hypothesis” that there are no costs of regulations. Outcomes of this analysis will help in understanding the dynamics of regulation-productivity relationship in long run. The analysis is done from 1958 to 2005 using information on North American Industry Classification System (NAICS) based 462 manufacturing industries from the NBER Manufacturing Productivity (MP) database, Environmental Protection Agency’s (EPA’s) Pollution Abatement Costs and Expenditures (PACE) survey, and Occupational Safety and Health Administration’s (OSHA’s) Management Information System. The comparison over time periods might help identify whether the main cost is one of adjusting to regulations in the first place, or there are continuing costs - assuming that someone is willing to accept industry-level regressions as evidence. This essay involves performing ordinary least squares (OLS) procedure focusing on “measured” productivity in particular. I find negative bigger effects for EPA than OSHA, unlike Gray (1987), and smaller or less significant contributions to productivity in later periods. This study proves at least there were some negative impacts of regulations on manufacturing productivity. Evidence has also been provided to indicate that pollution-abatement spending only affected the measurement of productivity growth, with no real effect on the productivity of inputs actually used in production. To my best knowledge, this is the first industry-level study covering information from 1958 to 2005 considering data from all PACE surveys till date and concerning both OSHA and EPA regulations.