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Who invests more in advanced abatement technology? Theory and evidence


  • Jing Cao
  • Larry D. Qiu
  • Mohan Zhou


We study firm investment in abatement technology under a heterogeneous-firm framework. We find that more-productive firms make more (less) investment in abatement technology if investment and productivity are complements (substitutes). Under linear demand, firms abatement investments exhibit an inverted U-shape with respect to productivity level. This finding is in contrast to results in existing studies. We also find that in response to tightened environmental regulations, more-productive firms raise their respective investments in abatement technology, whereas less-productive firms do the opposite. More-productive firms have lower pollution emission intensity. The key theoretical predictions are confirmed by empirical tests using Chinese data.

Suggested Citation

  • Jing Cao & Larry D. Qiu & Mohan Zhou, 2016. "Who invests more in advanced abatement technology? Theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 49(2), pages 637-662, May.
  • Handle: RePEc:cje:issued:v:49:y:2016:i:2:p:637-662

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    1. repec:taf:jitecd:v:26:y:2017:i:7:p:759-776 is not listed on IDEAS
    2. Jingbo Cui & Hang Qian, 2017. "The effects of exports on facility environmental performance: Evidence from a matching approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(7), pages 759-776, October.
    3. Forslid, Rikard & Okubo, Toshihiro & Ulltveit-Moe, Karen Helene, 2018. "Why are firms that export cleaner? International trade, abatement and environmental emissions," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 166-183.
    4. repec:anr:reveco:v:9:y:2017:p:59-85 is not listed on IDEAS
    5. Kreickemeier, Udo & Richter, Philipp M., 2019. "Environmental policy and firm selection in the open economy," KCG Working Papers 15, Kiel Centre for Globalization (KCG).
    6. repec:eee:jeeman:v:92:y:2018:i:c:p:638-658 is not listed on IDEAS
    7. Jevan Cherniwchan & Brian R. Copeland & M. Scott Taylor, 2016. "Trade and the Environment: New Methods, Measurements, and Results," CESifo Working Paper Series 6109, CESifo Group Munich.
    8. Jevan Cherniwchan & Brian R. Copeland & M. Scott Taylor, 2017. "Trade and the Environment: New Methods, Measurements, and Results," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 59-85, September.

    More about this item

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General


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