Estimating Environmental Productivity and Its Drivers with an Emphasis on Undesirable Products: an Analysis of Iran's Province Manufacturing Industries

Along with the manufacturing industries development, the sustainable development of this sector should be based on the continuous productivity growth of firms from the point of view of technological progress and efficiency improvement. In the manufacturing sector, product production can be accompanied by undesirable or unfavorable products, such as polluting gases, sewage, solid and liquid wastes, which ignoring them may lead to unbiased productivity and technical changes. The purpose of this article is to evaluate the changes of productivity and environmental efficiency of manufacturing industries in Iran's provinces.

To achieve the goal of the article, a two-step approach is used. In the first stage, the global Malmquist-Luenberger productivity index was measured the consideration of sewage and waste undesirable outputs and was divided into two components, technical efficiency changes and technological progress. In the second stage, the effect of environmental productivity growth drivers was estimated using Tobit, Logit and Probit models. The data of this article were extracted from the reports of the survey plan from industrial firms with 10 or more workers in the period of 2015-2019.

The findings of the first stage state that technological progress is the main contributor to environmental productivity growth in Iran’s manufacturing industries. The average change of environmental productivity has been Also decreased, which shows that the Iran’s provinces manufacturing firms are behind the existing global technology frontier. In our period, the criterion of eco-friendliness showed that 10 provinces were green and 16 were yellow, and the big provinces are also among yellow provinces. The results of the second stage indicate that there is an inverted U-shaped relationship between per capita income and environmental productivity growth. Also, the increase in the ratio of capital to employment has led to an increase in the environmental productivity growth; But the increase of energy intensity of manufacturing industries will reduce the environmental productivity.

In order to improve environmental productivity, industrial firms can help improve productivity, profit, competitiveness and enhance the quality of human life through evaluating the performance of economic firms, pricing processes of waste and waste of economic resources in the production process, as well as efforts to reduce pollution and harmful effects of the environment. Therefore, by reducing the production inputs consumption for a certain level of production or providing services, the reduction of production costs, the quality and products competitiveness at the national and global level will be improved, and the result will be the improvement of green economic growth. According to the results of the article, some policy recommendations can be suggested. First, the application and development of cleaner technologies and technologies that save energy consumption are the main drivers for the environmental productivity growth and sustainable development of Iran's provinces in the future. Second, considering the relationship between per capita income and the environmental productivity growth and since almost all large provinces such as Tehran and Isfahan are struggling with environmental problems, it is necessary to develop policies to increase industrial concentration in other provinces. In provinces with excessive economic activities such as Tehran, Isfahan and Khuzestan, it is necessary to control the industries density and population in these provinces in order to prevent the spread of pollution and other diseases of big cities that threaten sustainable development.