Clean Technological Change in Developing-Country Industrial Clusters: Mexican Leather Tanning

In many developing country cities, clusters of small and medium enterprises create severe pollution problems. Because conventional regulatory approaches are typically ineffective in such situations, policy responses have increasingly focused on promoting voluntary clean technological change. Yet the data and analysis needed to guide such efforts are scarce. This paper uses original firm-level survey data on a cluster of small- and medium-scale leather tanneries in Leon, Guanajuato -Mexico's leather capital-to econometrically identify the factors that drive the adoption of two clean tanning technologies. Using a multivariate probit model to estimate a system of seemingly unrelated regressions, we find-in contrast to conventional wisdom-that neither firm size nor regulatory pressure is positively correlated with adoption. Rather, the key driver of adoption is the firm's human capital, the same factor that often explains conventional productivity-enhancing technological change. We also find that a private-sector trade association is an important sources of technical information about clean technologies.