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

In many cities in developing countries, 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 firmlevel survey data on a cluster of small- and medium-scale leather tanneries in León, Guanajuato— Mexico’s leather capital—to econometrically identify the factors that drive the adoption of three 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 correlated with adoption. Rather, the drivers of adoption are the firm’s human capital and stock of technical information, the same factors that explain conventional productivity-enhancing technological change. We also find that private-sector trade associations and input suppliers are important sources of technical information about clean technologies.