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Environmental Preferences and Technological Choices: Is Market Competition Clean or Dirty?

Author

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  • Philippe Aghion

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France)

  • Roland Bénabou

    (Princeton University, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, CEPR - Center for Economic Policy Research - CEPR, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics)

  • Ralf Martin

    (Imperial College London, CEPR - Center for Economic Policy Research - CEPR)

  • Alexandra Roulet

    (INSEAD-Sorbonne Université Behavioural Lab - SU - Sorbonne Université - INSEAD - Institut Européen d'administration des Affaires, CEPR - Center for Economic Policy Research - CEPR)

Abstract

We investigate the effects of consumers' environmental concerns and market competition on firms' decisions to innovate in "clean" technologies. Agents care about their consumption and environmental footprint; firms pursue greener products to soften price competition. Acting as complements, these forces determine R&D, pollution, and welfare. We test the theory using panel data on patents by 7,060 automobile sector firms in 25 countries, environmental willingness to pay, and competition. As predicted, exposure to prosocial attitudes fosters clean innovation, all the more so where competition is strong. Plausible increases in both together can spur it as much as a large fuel price increase.

Suggested Citation

  • Philippe Aghion & Roland Bénabou & Ralf Martin & Alexandra Roulet, 2023. "Environmental Preferences and Technological Choices: Is Market Competition Clean or Dirty?," Post-Print halshs-04154405, HAL.
    • Handle: RePEc:hal:journl:halshs-04154405
    DOI: 10.1257/aeri.20210014
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    Cited by:

    1. Diane Coyle & Mark Fabian & Eric Beinhocker & Tim Besley & Margaret Stevens, 2023. "Is it time to reboot welfare economics? Overview," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 109-121, June.

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