The Impact Of Pollution Abatement Investments On Production Technology: New Insights From Frontier Analysis

This paper estimates the impact of pollution abatement investments on the production technology of firms by pursuing two new directions. First, we take advantage of recent econometric developments in productivity and eciency analysis and compare the results obtained with two complementary approaches: parametric stochastic frontier analysis and conditional nonparametric frontier analysis. Second, we focus not only on the average eect but also on its heterogeneity across rms and over time and search for potential nonlinearities. We provide new results suggesting that such an eect is heterogeneous both within rms and over time and indicating that the eect of pollution abatement investments on the production process is not monotonic. These results have relevant implications both for modeling and for the purposes of advice on environmentally friendly policy