Environmental regulations and market power: The case of the Korean manufacturing industries

In Korea, economic growth between 1980 and the mid-1990s was barely affected by environmental regulations. It could be the case that industries with more market power exercised more political power, which was translated into less expensive regulation, e.g., less rigorous monitoring or enforcement efforts. In this paper, we test a negative relationship between market power and the contribution of environmental regulations to productivity growth. A restricted cost function is jointly estimated with an inverse supply relation to measure the productivity growth effect of regulations and the degree of market power in 15 sub-industries in the Korean manufacturing industries over the period 1983-93.