The Contribution of Pollution to Productivity Growth Pantelis Kalaitzidakis University of Crete, Rethymno 74100, Greece Theofanis Mamuneas University of Cyprus, P.O. Box 20537, Nicosia 1678, Cyprus Thanasis Stengos University of Guelph, Guelph, Ontario, Canada N1G 2W1 September 2006 Abstract In this paper we examine the effect of pollution, as measured by CO2 emissions, on economic growth among a set of OECD countries during the period 1981-1998. We examine the relationship between total factor productivity (TFP) growth and pollution using a semiparametric smooth coefficient model that allows us to directly estimate the output elasticity of pollution. The results indicate that there exists a nonlinear relationship between pollution and TFP growth. The output elasticity of pollution is small with an average sample value of 0.008. In addition we find an average contribution of pollution to productivity growth of about one percent for the period 1981-1998. JEL Classifications: C14, O13, O40 Keywords: TFP Growth, Pollution, Semiparametric Regression, Smooth Coeffi- cients.