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Environmental regulation and investment: Evidence from European industry data

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  • Leiter, Andrea M.
  • Parolini, Arno
  • Winner, Hannes

Abstract

This paper contributes to the empirical literature on the effects of environmental regulation on investment. In particular, we ask whether and how strongly an industry's investment responds to stringency in environmental regulation. Environmental regulation is measured as (i) an industry's total current expenditure on environmental protection, and (ii) a country-industry's revenue from environmental taxes. Focusing on European data of manufacturing industries between 1998 and 2007, we estimate the differential impact of environmental stringency on four types of investment: gross investment in tangible goods, in new buildings, in machinery, and in 'productive' investment (investment in tangible goods minus investment in abatement technologies). Both environmental variables enter positively, and their quadratic terms exhibit significantly negative parameter estimates. This, in turn, indicates a positive but diminishing impact of environmental regulation on investment.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 70 (2011)
Issue (Month): 4 (February)
Pages: 759-770

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Handle: RePEc:eee:ecolec:v:70:y:2011:i:4:p:759-770

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Investment Environmental regulation Pollution abatement costs Europe;

References

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Citations

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Cited by:
  1. Bassem Kahouli & Anis Omri & Anissa Chaibi, 2014. "Environmental Regulations, Trade, and Foreign Direct Investment: Evidence from Gravity Equations," Working Papers 2014-189, Department of Research, Ipag Business School.
  2. Morley, Bruce & Abdullah, Sabah, 2010. "Environmental Taxes and Economic Growth : Evidence from Panel Causality Tests," Department of Economics Working Papers 18528, University of Bath, Department of Economics.
  3. Al-mulali, Usama & Foon Tang, Chor, 2013. "Investigating the validity of pollution haven hypothesis in the gulf cooperation council (GCC) countries," Energy Policy, Elsevier, vol. 60(C), pages 813-819.
  4. Richard G. Newell & William A. Pizer & Daniel Raimi, 2013. "Carbon Markets 15 Years after Kyoto: Lessons Learned, New Challenges," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 123-46, Winter.
  5. Chiara Franco & Giovanni Marin, 2013. "The Effect of Within-Sector, Upstream and Downstream Energy Taxes on Innovation and Productivity," SEEDS Working Papers 0214, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jan 2014.

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