IDEAS home Printed from https://ideas.repec.org/p/edj/ceauch/283.html
   My bibliography  Save this paper

Investment and Environmental Regulation: Evidence on the Role of Cash Flow

Author

Listed:
  • Evangelina Dardati
  • Julio Riutort

Abstract

We exploit the heterogeneity in pollution permits allocation and the variation in the permits price to identify a new channel by which cap-and-trade programs can affect firm decisions: they may affect investment through the impact of free pollution permits on the firms cash flow. A firm with a permit allocation higher than its emissions will have a higher cash inflow if the price of permits increases, whereas a firm whose emissions are higher than its permit allocation will have a higher cash outflow if the price of permits increases. In the margin they are both paying the same for pollution but the cash flow consequences of the change in permit prices differ. Using data from investor-owned utilities participating in the US SO2 program, we find that for smaller firms the permit cash flow is positively related to capital expenditures. Small firms with a high permit cash flow invest more tan small firms with a lower permit cash flow. This effect is consistent with smaller firms in this industry facing financial constraints.

Suggested Citation

  • Evangelina Dardati & Julio Riutort, 2011. "Investment and Environmental Regulation: Evidence on the Role of Cash Flow," Documentos de Trabajo 283, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:283
    as

    Download full text from publisher

    File URL: http://www.cea-uchile.cl/wp-content/uploads/doctrab/ASOCFILE120111107104433.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alejandra Mizala & Pilar Romaguera & Sebastian Gallegos, 2010. "Public-Private Wage Gap In Latin America (1999-2007): A Matching Approach," Documentos de Trabajo 268, Centro de Economía Aplicada, Universidad de Chile.
    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. Shuai Shao & Zhigao Hu & Jianhua Cao & Lili Yang & Dabo Guan, 2020. "Environmental Regulation and Enterprise Innovation: A Review," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1465-1478, March.

    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. James Albrecht & Monica Robayo-Abril & Susan Vroman, 2019. "Public-sector Employment in an Equilibrium Search and Matching Model," The Economic Journal, Royal Economic Society, vol. 129(617), pages 35-61.
    2. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    3. F. Balmaceda & S.R. Balseiro & J.R. Correa & N.E. Stier-Moses, 2010. "Cost of Moral Hazard and Limited Liability in the Principal-Agent Problem," Documentos de Trabajo 275, Centro de Economía Aplicada, Universidad de Chile.
    4. Juan F. Escobar & Juuso Toikka, 2013. "Efficiency in Games With Markovian Private Information," Econometrica, Econometric Society, vol. 81(5), pages 1887-1934, September.
    5. Romero-Medina, Antonio & Triossi, Matteo, 2014. "Non-revelation mechanisms in many-to-one markets," Games and Economic Behavior, Elsevier, vol. 87(C), pages 624-630.
    6. Romero-Medina, Antonio & Triossi, Matteo, 2013. "Acyclicity and singleton cores in matching markets," Economics Letters, Elsevier, vol. 118(1), pages 237-239.
    7. Felipe Balmaceda & Juan F. Escobar, 2012. "Self Governance in Social Networks of Information Transmission," Documentos de Trabajo 290, Centro de Economía Aplicada, Universidad de Chile.
    8. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    9. Sofia Bauducco & Alexandre Janiak, 2012. "Minimum wages strike back: the effects on capital and labor demands in a large-firm framework," Documentos de Trabajo 287, Centro de Economía Aplicada, Universidad de Chile.
    10. Antonio Romero-Medina & Matteo Triossi, 2013. "Games with capacity manipulation: incentives and Nash equilibria," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 701-720, September.
    11. Alexandre Janiak & Paulo Santos Monteiro, 2010. "Labor force heterogeneity: implications for the relation between aggregate volatility and government size," Documentos de Trabajo 272, Centro de Economía Aplicada, Universidad de Chile.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:edj:ceauch:283. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/ceuclcl.html .

    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.