Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73552
Authors: 
Leiter, Andrea M.
Parolini, Arno
Winner, Hannes
Year of Publication: 
2009
Series/Report no.: 
Working Papers in Economics and Statistics 2009-04
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 investment decisions of firms respond 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
JEL: 
D92
H23
Q52
Document Type: 
Working Paper

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