The Effect of Environmental Protection Expenditures on Industrial Employment in Sweden

Abstract

In this paper, we empirically investigate how environmental protection expenditures affect sector-level employment within manufacturing industries, using detailed firm-level data for Sweden for the years 2002-2021. We use a structural model that allows for a decomposition of the total employment effect of environmental protection expenditures within a sector into a cost effect, a factor shift effect, and a demand effect. We add to previous literature by using instrumental variables in our empirical framework, to account for endogenous environmental spending stemming from, e.g., corporate social responsibility and self-regulation. Our results reveal that increased environmental protection expenditures generally have no statistically significant effect on employment among the sectors studied, with the paper and pulp sector being the exception, showing non-negligible negative effects on employment.

Keywords

Environmental protection; Labor demand; Environmental regulation

Published in

Environmental and Resource Economics
2025
Publisher: SPRINGER

SLU Authors

• Lundgren, Tommy

  • Department of Forest Economics, Swedish University of Agricultural Sciences
    
  • Centre for Environmental and Resource Economics (CERE)

UKÄ Subject classification

Environmental Economics and Management

Publication identifier

• DOI: https://doi.org/10.1007/s10640-025-00961-7

Permanent link to this page (URI)

https://res.slu.se/id/publ/140870