Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311726 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 05.2025
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
This paper examines the effect of green investments on market power. I measure the market power as markup following the method provided in De Loecker and Warzynski (2012). For green investments, I consider specifically the investments of firms in energy efficient technologies, both as the binary variable and as the continuous variable. This allows the examination of how the presence of such investments as well as their intensity affect markups. I use firm, age, year, sector and country fixed effects with a representative sample of indicatively 12,000 firms from the European Investment Bank Investment Survey (EIBIS) in the panel from 2016 to 2022. I find the positive and statistically significant relationship that holds also when applying the 2SLS-IV methodology. This study is particularly relevant for firms that are willing to increase their market power and to improve their environmentally friendly image in the eyes of their customers without the need of engaging in greenwashing practices. Instead, the firms are invited to consider energy efficiency investments as a concrete way of improving both their markups and the loyalty of their customers.
Subjects: 
green investment
markup
market power
instrumental variable
JEL: 
Q56
L11
D22
C36
O13
Document Type: 
Working Paper

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