Does environmental protection lead to slower productivity growth in the chemical industry?

Efficiency and productivity growth is measured at the three-digit SIC level for six chemical industries for 1988-1993. The directional distance function is used to measure the lost chemical manufacturing output and the overproduction of toxic chemical releases. Total factor productivity growth is decomposed into a product of efficiency change and technical change. Accounting for toxic chemical releases, productivity grows at an annual rate of between 2.4% and 6.9%. We find no evidence that environmental protection measures reduce productivity growth.