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Environmental Regulation And Innovation: A Panel Data Study

  • Adam B. Jaffe
  • Karen Palmer

In a 1991 essay in Scientific American, Michael Porter suggested that environmental regulation may have a positive effect on the performance of domestic firms relative to their foreign competitors by stimulating domestic innovation. We examine the stylized facts regarding environmental expenditures and innovation in a panel of manufacturing industries. We find that lagged environmental compliance expenditures have a significant positive effect on R&D expenditures when we control for unobserved industry-specific effects. We find little evidence, however, that industries' inventive output (as measured by successful patent applications) is related to compliance costs. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 79 (1997)
Issue (Month): 4 (November)
Pages: 610-619

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Handle: RePEc:tpr:restat:v:79:y:1997:i:4:p:610-619
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  1. Barbera, Anthony J & McConnell, Virginia D, 1986. "Effects of Pollution Control on Industry Productivity: A Factor Demand Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 161-72, December.
  2. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
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  8. Hackett Steven C., 1995. "Pollution-Controlling Innovation in Oligopolistic Industries: Some Comparisons between Patent Races and Research Joint Ventures," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 339-356, November.
  9. Robert Ayres, 1994. "On economic disequilibrium and free lunch," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(5), pages 435-454, October.
  10. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
  11. Milliman, Scott R. & Prince, Raymond, 1992. "Firm incentives to promote technological change in pollution control: Reply," Journal of Environmental Economics and Management, Elsevier, vol. 22(3), pages 292-296, May.
  12. Barbera, Anthony J. & McConnell, Virginia D., 1990. "The impact of environmental regulations on industry productivity: Direct and indirect effects," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 50-65, January.
  13. Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
  14. Malueg, David A., 1989. "Emission credit trading and the incentive to adopt new pollution abatement technology," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 52-57, January.
  15. Biglaiser, Gary & Horowitz, John K, 1995. "Pollution Regulation and Incentives for Pollution-Control Research," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(4), pages 663-84, Winter.
  16. McCain, Roger A, 1978. "Endogenous Bias in Technical Progress and Environmental Policy," American Economic Review, American Economic Association, vol. 68(4), pages 538-46, September.
  17. Orr, Lloyd, 1976. "Incentive for Innovation as the Basis for Effluent Charge Strategy," American Economic Review, American Economic Association, vol. 66(2), pages 441-47, May.
  18. Lanjouw, Jean Olson & Mody, Ashoka, 1996. "Innovation and the international diffusion of environmentally responsive technology," Research Policy, Elsevier, vol. 25(4), pages 549-571, June.
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