IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v72y2018icp470-485.html
   My bibliography  Save this article

Environmental policy, technology adoption and the size distribution of firms

Author

Listed:
  • Coria, Jessica
  • Kyriakopoulou, Efthymia

Abstract

The potential impacts of strict environmental policies on production costs and firms' competitiviness are central to the choice of which policy to implement. However, not all the industries nor all firms within an industry are affected in the same way. In this paper, we investigate the effects of emission taxes, uniform emission standards, and performance standards on the size distribution of firms. Our results indicate that, unlike emission taxes and performance standards, emission standards introduce regulatory asymmetries favoring small firms. On the contrary, emission taxes and performance standards reduce to a lower extent profits of larger firms but they do modify the optimal scale of firms. We also show that when the regulatory asymmetries created by emissions standards are taken into account, the profitability of emissions reducing technologies is higher under emission standards than under market-based instruments.

Suggested Citation

  • Coria, Jessica & Kyriakopoulou, Efthymia, 2018. "Environmental policy, technology adoption and the size distribution of firms," Energy Economics, Elsevier, vol. 72(C), pages 470-485.
    • Handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:470-485
    DOI: 10.1016/j.eneco.2018.04.025
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988318301506
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2018.04.025?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. William A. Brock & David S. Evans, 2001. "The Economics of Regulatory Tiering," Chapters, in: W. D. Dechert (ed.), Growth Theory, Nonlinear Dynamics and Economic Modelling, chapter 9, pages 215-226, Edward Elgar Publishing.
    2. Paolo Angelini & Andrea Generale, 2008. "On the Evolution of Firm Size Distributions," American Economic Review, American Economic Association, vol. 98(1), pages 426-438, March.
    3. Conrad, Klaus & Wang, Jianmin, 1993. "The effect of emission taxes and abatement subsidies on market structure," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 499-518.
    4. Shinkuma, Takayoshi & Sugeta, Hajime, 2016. "Tax versus emissions trading scheme in the long run," Journal of Environmental Economics and Management, Elsevier, vol. 75(C), pages 12-24.
    5. Becker, Randy A. & Pasurka, Carl & Shadbegian, Ronald J., 2013. "Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 523-538.
    6. Sengupta Aditi, 2010. "Environmental Regulation and Industry Dynamics," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-29, June.
    7. Don Fullerton & Garth Heutel, 2010. "The General Equilibrium Incidence of Environmental Mandates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 64-89, August.
    8. Brita Bye & Marit E. Klemetsen, 2018. "The Impacts of Alternative Policy Instruments on Environmental Performance: A Firm Level Study of Temporary and Persistent Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 317-341, February.
    9. Shaffer, Sherrill, 1995. "Optimal Linear Taxation of Polluting Oligopolists," Journal of Regulatory Economics, Springer, vol. 7(1), pages 85-100, January.
    10. Joseph E. Aldy & William A. Pizer, 2015. "The Competitiveness Impacts of Climate Change Mitigation Policies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(4), pages 565-595.
    11. Alexeeva-Talebi, Victoria & Böhringer, Christoph & Löschel, Andreas & Voigt, Sebastian, 2012. "The value-added of sectoral disaggregation: Implications on competitive consequences of climate change policies," Energy Economics, Elsevier, vol. 34(S2), pages 127-142.
    12. Yoshifumi Konishi & Nori Tarui, 2015. "Emissions Trading, Firm Heterogeneity, and Intra-industry Reallocations in the Long Run," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(1), pages 1-42.
    13. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    14. Luís M B Cabral & José Mata, 2003. "On the Evolution of the Firm Size Distribution: Facts and Theory," American Economic Review, American Economic Association, vol. 93(4), pages 1075-1090, September.
    15. Gian Luca Clementi & Hugo A. Hopenhayn, 2006. "A Theory of Financing Constraints and Firm Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(1), pages 229-265.
    16. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    17. Esteban Rossi-Hansberg & Mark L. J. Wright, 2007. "Establishment Size Dynamics in the Aggregate Economy," American Economic Review, American Economic Association, vol. 97(5), pages 1639-1666, December.
    18. Kohn, Robert E., 1997. "The effect of emission taxes and abatement subsidies on market structure: Comment," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 617-628, August.
    19. Luis Garicano & Esteban Rossi-Hansberg, 2004. "Inequality and the Organization of Knowledge," American Economic Review, American Economic Association, vol. 94(2), pages 197-202, May.
    20. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    21. Daniel L. Millimet & Santanu Roy & Aditi Sengupta, 2009. "Environmental Regulations and Economic Activity: Influence on Market Structure," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 99-118, September.
    22. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
    23. Becker, Randy A. & Pasurka, Carl & Shadbegian, Ronald J., 2013. "Do environmental regulations disproportionately affect small businesses? Evidence from the Pollution Abatement Costs and Expenditures survey," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 523-538.
    24. Dean, Thomas J. & Brown, Robert L. & Stango, Victor, 2000. "Environmental Regulation as a Barrier to the Formation of Small Manufacturing Establishments: A Longitudinal Examination," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 56-75, July.
    25. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    26. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    27. Evangelina Dardati, 2016. "Pollution Permit Systems And Firm Dynamics: How Does The Allocation Scheme Matter?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 305-328, February.
    28. Requate, Till, 2005. "Dynamic incentives by environmental policy instruments--a survey," Ecological Economics, Elsevier, vol. 54(2-3), pages 175-195, August.
    29. Pashigian, B Peter, 1984. "The Effect of Environmental Regulation on Optimal Plant Size and Factor Shares," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 1-28, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Geng, Yong & Liu, Wei & Li, Kai & Chen, Hanshu, 2021. "Environmental regulation and corporate tax avoidance: A quasi-natural experiment based on the eleventh Five-Year Plan in China," Energy Economics, Elsevier, vol. 99(C).
    2. Shi, Xunpeng & Tian, Binbin & Yang, Longjian & Yu, Jian & Zhou, Siyang, 2023. "How do regulatory environmental policies perform? A case study of China's Top-10,000 enterprises energy-saving program," Renewable and Sustainable Energy Reviews, Elsevier, vol. 187(C).
    3. He, Zhenyu & Tang, Yuwei, 2023. "Local environmental constraints and firms’ export product quality: Evidence from China," Economic Modelling, Elsevier, vol. 124(C).
    4. Santosh Kumar Sahu & Prantik Bagchi & Ajay Kumar & Kim Hua Tan, 2022. "Technology, price instruments and energy intensity: a study of firms in the manufacturing sector of the Indian economy," Annals of Operations Research, Springer, vol. 313(1), pages 319-339, June.
    5. Alan Finkelstein Shapiro & Gilbert E. Metcalf, 2021. "The Macroeconomic Effects of a Carbon Tax to Meet the U.S. Paris Agreement Target: The Role of Firm Creation and Technology Adoption," NBER Working Papers 28795, National Bureau of Economic Research, Inc.
    6. Dardati, Evangelina & Saygili, Meryem, 2020. "Aggregate impacts of cap-and-trade programs with heterogeneous firms," Energy Economics, Elsevier, vol. 92(C).
    7. Finkelstein Shapiro, Alan & Metcalf, Gilbert E., 2023. "The macroeconomic effects of a carbon tax to meet the U.S. Paris agreement target: The role of firm creation and technology adoption," Journal of Public Economics, Elsevier, vol. 218(C).
    8. Christian Balcells, 2022. "Determinants of firm boundaries and organizational performance: an empirical investigation of the Chilean truck market," Journal of Evolutionary Economics, Springer, vol. 32(2), pages 423-461, April.
    9. Hamaguchi, Yoshihiro, 2023. "Environmental tax evasion as a determinant of the Porter and pollution haven hypotheses in a corrupt political system," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 610-633.
    10. Yoshihiro Hamaguchi, 2024. "Whether to Abolish or Introduce Dual Regulation as Trade and Environmental Policy?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 32(1), pages 57-95, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Coria, Jessica & Kyriakopoulou, Efthymia, 2015. "Environmental Policy and the Size Distribution of Firms," Working Papers in Economics 614, University of Gothenburg, Department of Economics.
    2. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2006. "Multi-Product Firms and Product Switching," NBER Working Papers 12293, National Bureau of Economic Research, Inc.
    3. Louis Kaplow, 2017. "Optimal Regulation with Exemptions," NBER Working Papers 23887, National Bureau of Economic Research, Inc.
    4. Kaplow, Louis, 2019. "Optimal regulation with exemptions," International Journal of Industrial Organization, Elsevier, vol. 66(C), pages 1-39.
    5. Roman Fossati, 2011. "Outsourcing versus Vertical Integration: A Dynamic Model of Industry Equilibrium," 2011 Meeting Papers 1421, Society for Economic Dynamics.
    6. Sengupta Aditi, 2010. "Environmental Regulation and Industry Dynamics," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-29, June.
    7. Cristina Fernández & Roberta García & Paloma Lopez-Garcia & Benedicta Marzinotto & Roberta Serafini & Juuso Vanhala & Ladislav Wintr, 2017. "Firm growth in Europe: An overview based on the COMPNET labour module," BCL working papers 107, Central Bank of Luxembourg.
    8. Acemoglu, Daron & Cao, Dan, 2015. "Innovation by entrants and incumbents," Journal of Economic Theory, Elsevier, vol. 157(C), pages 255-294.
    9. Nicolas Berman & Vincent Rebeyrol & Vincent Vicard, 2019. "Demand Learning and Firm Dynamics: Evidence from Exporters," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 91-106, March.
    10. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2009. "Products and Productivity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 681-709, December.
    11. Alex Coad, 2007. "Firm Growth: a Survey," Post-Print halshs-00155762, HAL.
    12. Chiara Criscuolo & Peter N. Gal & Carlo Menon, 2014. "The Dynamics of Employment Growth: New Evidence from 18 Countries," CEP Discussion Papers dp1274, Centre for Economic Performance, LSE.
    13. John Hutchinson & Jozef Konings & Patrick Walsh, 2010. "The Firm Size Distribution and Inter-Industry Diversification," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(2), pages 65-82, September.
    14. Şeker, Murat, 2012. "A structural model of firm and industry evolution: Evidence from Chile," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 891-913.
    15. Ruben Dewitte & Michel Dumont & Glenn Rayp & Peter Willemé, 2022. "Unobserved heterogeneity in the productivity distribution and gains from trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(3), pages 1566-1597, August.
    16. Hugo A. Hopenhayn, 2011. "Firm Microstructure and Aggregate Productivity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s1), pages 111-145, August.
    17. Halvarsson, Daniel, 2013. "Industry Differences in the Firm Size Distribution," Ratio Working Papers 214, The Ratio Institute.
    18. Eugénio Pinto, 2008. "Firm dynamics with infrequent adjustment and learning," Finance and Economics Discussion Series 2008-14, Board of Governors of the Federal Reserve System (U.S.).
    19. Hongya Li & Laiqun Jin & Yuanyao Ding, 2019. "Innovation, Mark-Up and Firm Growth: Evidence from China’s New Generation IT Industry," Sustainability, MDPI, vol. 11(7), pages 1-19, April.
    20. Kim Huynh & David Jacho-Chávez & Robert Petrunia & Marcel Voia, 2015. "A nonparametric analysis of firm size, leverage and labour productivity distribution dynamics," Empirical Economics, Springer, vol. 48(1), pages 337-360, February.

    More about this item

    Keywords

    Environmental regulations; Energy efficiency; Size distribution; Emission taxes; Emission standards; Performance standards;
    All these keywords.

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:470-485. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.