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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.

Suggested Citation

  • 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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    Cited by:

    1. Antoine Dechezleprêtre & Misato Sato, 2017. "The Impacts of Environmental Regulations on Competitiveness," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(2), pages 183-206.
    2. Francesco Vona & Giovanni Marin & Davide Consoli & David Popp, 2018. "Environmental Regulation and Green Skills: An Empirical Exploration," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(4), pages 713-753.
    3. Barbieri, Nicolò, 2016. "Fuel prices and the invention crowding out effect: Releasing the automotive industry from its dependence on fossil fuel," Technological Forecasting and Social Change, Elsevier, vol. 111(C), pages 222-234.
    4. Grazia Cecere & Nicoletta Corrocher, 2016. "Stringency of regulation and innovation in waste management: an empirical analysis on EU countries," Industry and Innovation, Taylor & Francis Journals, vol. 23(7), pages 625-646, October.
    5. Hottenrott, Hanna & Rexhäuser, Sascha & Veugelers, Reinhilde, 2016. "Organisational change and the productivity effects of green technology adoption," Resource and Energy Economics, Elsevier, vol. 43(C), pages 172-194.
    6. Wu, Haitao & Hao, Yu & Ren, Siyu, 2020. "How do environmental regulation and environmental decentralization affect green total factor energy efficiency: Evidence from China," Energy Economics, Elsevier, vol. 91(C).
    7. David Popp, 2019. "Environmental policy and innovation: a decade of research," CESifo Working Paper Series 7544, CESifo.
    8. Nicolò Barbieri, 2015. "Environmental policy and invention crowding out. Unlocking the automotive industry from fossil fuel path dependence," SEEDS Working Papers 0615, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Mar 2015.
    9. Jens Horbach, 2020. "Impacts of regulation on eco-innovation and job creation," IZA World of Labor, Institute of Labor Economics (IZA), pages 265-265, November.
    10. George Halkos & Antonis Skouloudis, 0. "Environmental technology development and diffusion: panel data evidence from 56 countries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 0, pages 1-14.
    11. Jens Horbach, 2016. "Impacts of regulation on eco-innovation and job creation," IZA World of Labor, Institute of Labor Economics (IZA), pages 265-265, June.
    12. David Popp, 2019. "Environmental Policy and Innovation: A Decade of Research," NBER Working Papers 25631, National Bureau of Economic Research, Inc.
    13. George Halkos & Antonis Skouloudis, 2021. "Environmental technology development and diffusion: panel data evidence from 56 countries," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 79-92, January.

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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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