Craig S. Marxsen firstname.lastname@example.org is an Associate Professor of Economics at the
University of Nebraska at Kearney.
The Bush administration has pointed with pride to the recent rapid growth of
productivity in America while its detractors were denouncing his administration’s easing
of American environmental regulatory enforcement and its halting of a formerly
relentless intensification of environmental protection. In this paper, its author attempts to
link the latest American productivity growth surge to the allegedly reduced
environmental regulatory zeal of the Bush administration.
The celebrated IT revolution has not produced a similar recent productivity
performance in Europe, where pervasive efficiency stifling regulatory constraints now
prevail. Thus, America’s experience sharply contrasts with a relatively stagnant Europe
that has presently swung toward greater environmental militancy. Econometric studies
repeatedly identified earlier American environmental regulations’ stagnating impact.
This paper concludes with a cross-sectional data analysis revealing that the
pattern of accelerating productivity growth in manufacturing during the Bush
administration is the mirror image of the pattern of slowing manufacturing productivity
growth accompanying the post-1973 ascent of environmental compliance costs.
A Regulatory Moderation Theory of the Productivity Boom
As is shown in Exhibit 1 below, the 2005 Economic Report of the President
provides a graphic portrait of the behavior of productivity growth.
The 2006 Economic Report of the President (36) describes the 3.6 percent
average annual growth rate of American labor productivity in the non-farm business
sector since the business cycle peak in the first quarter of 2001 as “exceptionally
vigorous”. It has been “notably higher than during any comparable 4 ½ year period
since 1948” (36). While capital deepening and an increase in organizational capital
associated with the I