ENVIRONMENTAL-REGULATIONS AND PLANT EXIT - A LEGIT ANALYSIS BASED ON ESTABLISHMENT PANEL-DATA

A qualitative response model is applied to study the relationship betw een environmental regulations and plant exit. The data set is Norwegia n panel data for establishments in three manufacturing sectors that ha ve high shares of units which have been under strict environmental reg ulations. In two of the sectors, the estimated exit probability of reg ulated establishments is, ceteris paribus, only one third of the exit probability of non-regulated establishments. We also find that the pro bability to change regulation status from being non-regulated to becom e regulated depends significantly on economic factors. In particular, establishments with weak profitability had the highest probability to come under environmental regulation.