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Policy-induced environmental technology and incentive efforts: Is there a crowding out?

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  • Hottenrott, Hanna
  • Rexhäuser, Sascha

Abstract

Significant policy effort is devoted to stimulate the development, adoption and diffusion of environmentally-friendly technology. Sceptics worry about the effects of regulation-induced environmental technology on firms' competitiveness. Since innovation is a crucial productivity driver, a potential crowding out of inventive efforts could increase the cost of mitigating environmental damage. Using matching techniques, we study the short-term effects of regulation-induced environmental technology on non-green innovative activities for a sample of firms in Germany. We find indeed some evidence for a crowding out of the firms' in-house R&D. The estimated treatment effect is larger for firms that are likely to face financing constraints. However, we do not find negative effects on the number of ongoing R&D projects, investments in innovation-related fixed assets or on the outcome of innovation projects. Likewise, for firms with subsidy-backed environmental innovations no crowding out is found.

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  • Hottenrott, Hanna & Rexhäuser, Sascha, 2013. "Policy-induced environmental technology and incentive efforts: Is there a crowding out?," ZEW Discussion Papers 13-115, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:13115
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    More about this item

    Keywords

    Environmental Policy; Regulation; R&D; Technological Change; Innovation; Crowding Out;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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