A Direct Estimate of the Technique Effect: Changes in the Pollution Intensity of US Manufacturing, 1990–2008

Pollution emitted by US manufacturers is falling while output is rising. What accounts for this cleanup? Prior studies attribute the majority to “technique,” a mix of input substitution, process changes, and end-of-pipe controls. But that estimate is a residual left over after calculating other explanations. This paper provides the first direct estimate of the technique effect. I calculate analogues to Laspeyres and Paasche price indexes across more than 400 industries for six major air pollutants. The directly estimated technique effect confirms the indirect estimates. Production technique changes account for 90% of the overall cleanup of US manufacturing.