The Evolution of Economies of Scale Regarding Pollution Control: Cross-Sectional Evidence from a Transition Economy

Abstract

This paper assesses whether firms face economies and/or diseconomies of scale with respect to air pollution control by evaluating the effects of production on firm-level air emission levels. To achieve this objective, this paper uses an unbalanced panel of Czech firms during the country’s transitional period of 1993 to 1998. By examining each year separately, the analysis permits firms’ abilities to control air pollution to vary over time. In general, results indicate that, as production rises, Czech firms first face diseconomies of scale but later enjoy economies of scale.