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Environmental Policies, Innovation and Productivity in EU

Author

Listed:
  • Roberta De Santis

    () (ISTAT)

  • Cecilia Jona Lasinio

    () (ISTAT)

Abstract

In a globalized framework, environmental regulations can have a decisive role in influencing countries’ comparative advantages. The conventional perception about environmental protection is that it imposes additional costs on firms, which may reduce their global competitiveness with negative effects on growth and employment. However, some economists, in particular Porter and Van der Linde (1995), argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may over-compensate for the costs of complying with these policies. This is known as the Porter hypothesis and suggests the existence of a “double dividend”, for both economic and environmental aspects, related to environmental regulation. In this paper, we adopt a macroeconomic approach to investigate the impact of different environmental instruments on the economy as a whole. We investigate the environmental policy impacts on a sample of European economies in 1995-2008. Our findings suggest that the “narrow” Porter Hypothesis cannot be rejected and that the choice of the policy instruments is not neutral. In particular, market based environmental stringency measures look as the most effective to stimulate innovations and productivity.

Suggested Citation

  • Roberta De Santis & Cecilia Jona Lasinio, 2015. "Environmental Policies, Innovation and Productivity in EU," Working Papers LuissLab 15122, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  • Handle: RePEc:lui:lleewp:15122
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    References listed on IDEAS

    as
    1. Alain de Serres & Fabrice Murtin & Giuseppe Nicoletti, 2010. "A Framework for Assessing Green Growth Policies," OECD Economics Department Working Papers 774, OECD Publishing.
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    3. Yoruk, BarIs K. & Zaim, Osman, 2005. "Productivity growth in OECD countries: A comparison with Malmquist indices," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 401-420, June.
    4. Michelacci, Claudio & Schivardi, Fabiano, 2008. "Does Idiosyncratic Business Risk Matter?," CEPR Discussion Papers 6910, C.E.P.R. Discussion Papers.
    5. Silvia Albrizio & Tomasz Koźluk & Vera Zipperer, 2014. "Empirical Evidence on the Effects of Environmental Policy Stringency on Productivity Growth," OECD Economics Department Working Papers 1179, OECD Publishing.
    6. Alejandro Cuñat & Marc J. Melitz, 2010. "A Many-Country, Many-Good Model of Labor Market Rigidities as a Source of Comparative Advantage," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 434-441, 04-05.
    7. repec:fth:harver:1473 is not listed on IDEAS
    8. Paul Lanoie & Jérémy Laurent‐Lucchetti & Nick Johnstone & Stefan Ambec, 2011. "Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(3), pages 803-842, September.
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    11. Fischer, Carolyn & Parry, Ian W. H. & Pizer, William A., 2003. "Instrument choice for environmental protection when technological innovation is endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 523-545, May.
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    More about this item

    Keywords

    environmental regulation; productivity; innovation; Porter hypothesis.;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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