Do climate policies explain the productivity puzzle?
Productivity growth in advanced economies has slowed. What accounts for it remains a puzzle. One possible explanation lies with the increased stringency of environmental regulations. We investigate this possibility in the case of the regulated energy network industries in a sample of OECD countries over the period 1998-2016. Our analysis is twofold. First, using the growth accounting method, we estimate total factor productivity (TFP) growth in the electricity and gas sectors and find that these exhibit a lower TFP growth than the whole economy over the period. TFP growth falls further post-financial crisis. Second, we identify the impact of climate policies on productivity levels. We find that energy and climate policy indirectly reduced energy sector and economy-wide productivity.