Do Environmental Standards Harm Manufacturing Employment?

A major issue in the debate about imposing environmental standards on polluting firms is the possibility of negative effects on employment. We examine the impact of environmental regulations on employment in an empirical analysis. Norwegian data are used to study three manufacturing sectors with high shares of units under strict environmental regulations. We find that for two of these sectors, firms under strict environmental regulations had a higher tendency to increase employment and a lower tendency to exit than firms under weak or no environmental regulation. For the third sector, environmental regulations had no significant impact on employment.