Greenhouse Emissions and Productivity Growth

In this paper, we examine the effect of emissions, as measured by carbon dioxide (CO2), on economic growth among a set of OECD countries during the period 1981–1998. We examine the relationship between total factor productivity (TFP) growth and emissions using a semiparametric smooth coefficient model that allow us to directly estimate the output elasticity of emissions. The results indicate that there exists a monotonically-increasing relationship between emissions and TFP growth. The output elasticity of CO2 emissions is small with an average sample value of 0.07. In addition, we find an average contribution of CO2 emissions to productivity growth of about 0.063 percent for the period 1981–1998.