The dynamic relationship between emissions and manufacturing firm’s growth

Within the studies on the interrelations between environmental and economic performances of firms, the research directions of higher added value are currently three: (i) the effects of environmental performance and innovations on economic performances, given the relatively wider space the drivers of environmental innovations have occupied (Mazzanti and Zoboli 2008); (ii) an increasing attention to the dynamics of relationships in the short run and medium/long run; (iii), extending at micro and meso levels the analyses from manufacturing to other industries, as recently proposed by Cainelli et al. (in press) and Mazzanti and Zoboli (2009a). This chapter aims at providing a contribution on points (i) and (ii) above. It focuses on manufacturing industry; nevertheless, it uses a very large data set, compared to predominant survey-based analyses relying on often small scale samples. It does not suffer from cross-sectional biases, often plaguing ad hoc survey data which rarely escape the cross section trap, if not by repeated surveys over time, since it models a dynamic relationship between emissions and firm-level economic growth. More specifically, this chapter investigates the empirical link between firms economic growth and emissions, using a very large data set of more than 60,000 Italian manufacturing firms. Economic data refer to the period 2000-2004. In order to circumvent the unavailability of data on environmental performance indicators at this level of microeconomic detail, we use as a measure of environmental performance by exploiting sector based NAMEA data, from which we recover firm based data. The Italian NAMEA provides detailed data at two digit level on main emissions, value added and employees over 1990-2003. Taking data for the periods 1990-1999 and 1992-1995 in order to impose a lag structure to the modelled relationship, we reconstruct emission per employees ratios at firm level by using sector coefficients of emissions per unit of labour and panel data on employment of firms, as a pragmatic and only available proxy of environmental performance from official data at firm level