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Green Investment in the EU and the US: Markup Insights

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  • Anastasia Bruni

    (Fondazione Eni Enrico Mattei and Catholic University of Sacred Heart)

Abstract

This paper examines the effect of green investments on market power. I measure the market power as markup following the method provided in De Loecker and Warzynski (2012). For green investments, I consider specifically the investments of firms in energy efficient technologies, both as the binary variable and as the continuous variable. This allows the examination of how the presence of such investments as well as their intensity affect markups. I use firm, age, year, sector and country fixed effects with a representative sample of indicatively 12,000 firms from the European Investment Bank Investment Survey (EIBIS) in the panel from 2016 to 2022. I find the positive and statistically significant relationship that holds also when applying the 2SLS-IV methodology. This study is particularly relevant for firms that are willing to increase their market power and to improve their environmentally friendly image in the eyes of their customers without the need of engaging in greenwashing practices. Instead, the firms are invited to consider energy efficiency investments as a concrete way of improving both their markups and the loyalty of their customers.

Suggested Citation

  • Anastasia Bruni, 2025. "Green Investment in the EU and the US: Markup Insights," Working Papers 2025.05, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2025.05
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    More about this item

    Keywords

    green investment; markup; market power; instrumental variable;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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