Clean and Productive? Evidence from the German Manufacturing Industry

Abstract

Abstract:In this paper, we analyze the productivity effects of environment-and energyrelated expenditure and investment activities. For this purpose, we follow a production function approach accounting for environmental investment as well as environmental and energy expenditures as capital inputs, and making use a panel dataset of the German manufacturing industry between 1996 and 2002. Our estimations show only week evidence for a significant contribution of both environmental and energy expenditures for production growth. In contrast, environmental investment positively impacts on productivity. Our results therefore suggest that environmental performance, measured with environmental investment, may be a productivity driver. Given this, environmental regulation does not necessarily slow down production growth. In order to be compatible with economic goals such as productivity, however, it should stimulate investment.