The Impact of Pollution Charges on Productivity Growth in Canadian Brewing

This article presents an econometric analysis of the productivity impact of pollution charges on firms in the Canadian brewing industry. We estimate a translog cost function that allows for differences between regulated and unregulated plants. Productivity is measured by the standard residual method. The empirical work, which is based on plant level data from a single industry, suggests that pollution charges have a negative impact on productivity growth. This, however, is not necessarily undesirable, since accompanying these costs are definite benefits in terms of a cleaner environment.