Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316268 
Year of Publication: 
2025
Series/Report no.: 
DIW Discussion Papers No. 2115
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
How do firms respond to greener household preferences? We construct a novel index of environmental willingness to act on the state-quarter level based on Google Trends search data. Relating the index to firm-level information on the U.S. auto- motive sector from 2006 to 2019, we find ambiguous results. On average, firms innovate more in electric, hydrogen, and hybrid (clean) technologies and reduce combustion engine-related (dirty) innovation over time. However, firms also increase anti-environmental lobbying expenditures. We show that firms with a dirtier product portfolio tend to lobby more against stricter environmental regulation but also reduce R&D investment in dirty technologies to a greater extent. Firms' reactions to greener household preferences are stronger and more persistent than responses to higher fuel prices. Moreover, greener preferences have the additional effect of lowering innovation in dirty technologies. We interpret these results as evidence that shifts in household preferences are highly effective in promoting a market-based green transition. However, they also imply more anti-environmental lobbying, thereby complicating environmental policymaking.
Subjects: 
Green Household Preferences
Directed Technical Change
Environmental Lobbying
JEL: 
D9
D70
O3
P28
Q55
Document Type: 
Working Paper

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