Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71857
Authors: 
Leiter, Andrea M.
Parolini, Arno
Winner, Hannes
Year of Publication: 
2010
Series/Report no.: 
Working Papers in Economics and Finance, University of Salzburg 2010-01
Abstract: 
This paper contributes to the empirical literature on the relationship between environmental regulation and firm behavior. In particular, we ask whether and how strongly an industry's investment responds to stringency in environmental regulation. Environmental stringency is measured as (i) an industry's total current expenditure on environmental protection, and (ii) a country's revenue from environmental taxes. Focusing on European industry level data between 1995 and 2005, we estimate the differential impact of environmental stringency on four types of investment: gross investment in tangible goods, in new buildings, in machinery, and in `productive' investment (investment in tangible goods minus investment in abatement technologies). Both environmental variables enter positively, and their quadratic terms exhibit significantly negative parameter estimates. This, in turn, indicates a positive but diminishing impact of environmental regulation on investment.
Subjects: 
Investment
environmental regulation
pollution abatement costs
Europe
JEL: 
D92
H23
Q52
Document Type: 
Working Paper

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