The Impact of Environmental and Occupational Health Regulation on Productivity Growth in U.S. Manufacturing

Abstract

This study analyzes the impact of environmental and occupational health regulation upon productivity levels and productivity growth rates in 445 U.S. manufacturing industries between 1974 and 1986. Costs imposed by regulation are much more significant in terms of diminished productivity than in terms of direct compliance expenditures. The study does not support a "technology-forcing" interpretation of EPA and OSHA regulations, which avers that regulation pushes firms to adopt more efficient products and processes. On the contrary, the data suggest that regulation diverts economic resources and managerial attention away from productivity-enhancing innovation. These productivity losses may be a onetime event, caused by the dramatic rise in public concern and subsequent regulation of the most polluting and unsafe industries during the 1970s. If regulatory initiatives are to continue and we are to sustain society's commitment to environmental quality and occupational health, creative risk management approaches are needed that promote rather than impede technological innovation and productivity growth in regulated industries