Locational Response of German Manufacturers to Environmental Standards

This paper discusses the relevance of environmental regulations with respect to plant closures and cross‐border relocations by small and medium‐sized manufacturers. Analyses show that tightening environmental standards have not yet resulted in the relocation of production capacities out of Germany to any alarming degree. Although empirical results support the assumption that environmental protection is not a general threat to manufacturing jobs, they do indicate differences between firms. The spatial and organisational adaptation to environmental regulations depends on the structural characteristics of a firm. Small enterprises and manufacturers of customised machinery are less likely to close production facilities due to environmental regulations than other firms. In these cases, policy‐makers and local planners still have considerable room to negotiate environmental restrictions. Their position is weaker when dealing with larger manufacturers of standardised products because these firms are able to shift production capacities to other locations more easily.