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Extensive environmental regulations have brought cleaner air and health improvements to the United States, but they also have increased the cost of manufacturing and reduced industrial productivity, according to a study by economists at the University of Chicago and MIT.
Some economists have suggested that the regulations encouraged companies to become more efficient, thus reducing costs at upgraded plants. But in a paper published by the National Bureau of Economic Research, three economists contend that the regulations led to a 4.8 percent decline in productivity and reduced profits by nearly 9 percent from 1972-93.
The researchers found that the organic chemical industry — companies that produce turpentine or benzene, for instance — are the most impacted by the regulations. They experienced a 17 percent reduction in productivity during the study period in non-attainment counties. The industry is only regulated for ozone, but had an annual loss of $9.2 billion during the study period when measured in 2010 dollars.
Different manufacturing companies bare the cost accordingly. I think we can all agree Ozone must be regulated.
The scholars also looked at how companies increased their prices in order to compensate for their increased costs and studied the ready-mixed concrete industry specifically because it was a specialized industry that dealt with one common product. The study estimated that companies increased their prices by about one percent in response to the regulations.
The approach used to studying the impact of regulations brought on by laws could possibly be expanded to study in the impact of other regulations, the scholars said.