Pollution, Production, and Sectoral Differences in a Transition Economy
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Pollution, Production, and Sectoral Differences in a Transition Economy DIETRICH EARNHART1 & LUBOMIR LIZAL2 1
Department of Economics, 213 Summerfield Hall, University of Kansas and William Davidson Institute (WDI), Lawrence, KS 66045, USA. E-mail: [email protected] 2 Holds Citicorp Professorship at CERGE-EI, a joint workplace of Charles University and the Academy of Sciences of the Czech Republic
This paper analyses corporate environmental performance, as measured by air pollutant emissions, in the transition economy of the Czech Republic. In particular, this paper assesses whether firms face economies and/or diseconomies of scale with respect to pollution control by evaluating the effects of production on emission levels. As important, this paper assesses whether certain sectors face different scales of production – economy or diseconomy – than other sectors. To achieve these objectives, this paper uses an unbalanced panel of Czech firms for the years 1993–1998. Comparative Economic Studies (2006) 48, 662–681. doi:10.1057/palgrave.ces.8100190
Keywords: air pollution, scale of production, sectoral differences JEL Classifications: D21, D62, Q53
INTRODUCTION Recent economic studies examine the factors driving corporate environmental performance in transition economies (eg, Bluffstone, 1999). Our study analyses firm-level environmental performance, as measured by the level of air pollutants emitted by large stationary sources, in the transition economy of the Czech Republic during the years 1993–1998. In particular, our study assesses whether firms face economies and/or diseconomies of scale with respect to pollution control by evaluating the effects of production on emission levels. As important, this paper assesses whether certain sectors face different scales of production – economy or diseconomy – than other sectors. Specifically, this paper assesses whether the effects of production on emissions differ across various sectors.
D Earnhart & L Lizal Pollution, Production, and Sectoral Differences
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This close examination of production scale effects, including their variation across sectors, stands in stark contrast to previous studies. Certainly, no study of a transition economy scrutinises the effects of production and sector. This omission extends to studies of any economy. While previous studies include production and sector as control variables in their empirical analysis (Khanna and Damon, 1999; Magat and Viscusi, 1990; Foulon et al., 2002; Earnhart and Lizal, 2006), these studies fail to scrutinise the important relationship between pollution, production, and sector. This paper explores the relationship between pollution and production within the following format. The following section develops a simple framework for understanding production scale effects. Next section describes the database on firm-level air pollutant emissions and production. Next one estimates and interprets the effects of production scale and sectoral differences on air pollutant emissions. The final s
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