Environmental regulation and productivity growth: Main policy challenges

In this paper, we investigate the environmental regulation-productivity nexus for 18 OECD countries over the years 1990–2015 and discuss its main policy challenges. Our findings support the hypothesis that environmental policies generate positive productivity returns through inno- vation as suggested by Porter and Van Der Linde (1995). We find that environmental policies have a productivity growth-promoting effect. Both market and non-market based policies exert a pos- itive but differentiated impact both on labour and multifactor productivity growth. As for specific policies, green taxes display the largest effect on multifactor productivity although with poten- tially negative redistributive effects. We also find that environmental regulation exerts an indirect positive impact on productivity growth fostering capital accumulation especially in high ICT intensive countries.